Form 10-K/A
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K/A
Amendment No. 2
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(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the year ended December 31,
2007
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number
001-15925
COMMUNITY HEALTH SYSTEMS,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
(State of
incorporation)
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13-3893191
(IRS Employer
Identification No.)
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4000 Meridian Boulevard
Franklin, Tennessee
(Address of principal
executive offices)
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37067
(Zip Code)
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Registrants telephone number, including area code:
(615) 465-7000
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value
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New York Stock Exchange
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Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. YES þ NO o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. YES o NO þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. YES þ NO o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the
Form 10-K
or any amendment to the
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):
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Large
accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). YES o NO þ
The aggregate market value of the voting stock held by
non-affiliates of the Registrant was $3,838,926,302. Market
value is determined by reference to the closing price on
June 30, 2007 of the Registrants Common Stock as
reported by the New York Stock Exchange. The Registrant does not
(and did not at June 30, 2007) have any non-voting
common stock outstanding. As of February 1, 2008, there
were 96,618,751 shares of common stock, par value $.01 per
share, outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
The information required for Part III of this annual report
is incorporated by reference from portions of the
Registrants definitive proxy statement for its 2008 annual
meeting of stockholders to be filed with the Securities and
Exchange Commission within 120 days after the end of the
Registrants fiscal year ended December 31, 2007.
Table of
Contents
Community
Health Systems, Inc.
Form 10-K/A
Year
ended December 31, 2007
1
EXPLANATORY
NOTE
The Company is filing this Amendment No. 2 to its Annual
Report on
Form 10-K/A
for the year ended December 31, 2007 that was originally
filed on February 29, 2008 and amended on April 4,
2008 (the original
Form 10-K)
to conform Part II, Item 8
(Financial Statements and Supplementary Data) of the original
Form 10-K
to reflect revisions previously made in the Companys
quarterly filings on
Form 10-Q
for the periods ended June 30, 2008 and September 30,
2008. This Amendment No. 2 will subsequently be
incorporated by reference into a Registration Statement on
Form S-3ASR.
Absent the filing of a registration statement under the
Securities Act of 1933, the revisions were deemed to be
immaterial and would not otherwise have required an amendment to
the original
Form 10-K, and
would have instead been reflected in the Companys Annual Report
on Form 10-K for the year ending December 31, 2008.
Other than as specified above, this Amendment No. 2 on
Form 10-K/A
does not modify, update or affect any other disclosures or
financial statements set forth in the original
Form 10-K.
Furthermore, this Amendment No. 2 on
Form 10-K/A
does not purport to provide a general update or discussion of
any developments of the Company subsequent to the filing
of the original
Form 10-K.
Accordingly, the original
Form 10-K as amended
by this Amendment No. 2 on
Form 10-K/A,
should be read in conjunction with the Companys filings
made with the Securities and Exchange Commission subsequent to
the date of the original
Form 10-K.
On April 4, 2008, the Company filed Amendment No. 1 to
its Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 to amend the Exhibit List set forth in Part IV,
Item 15.
2
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Item 8.
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Financial
Statements and Supplementary Data.
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Index to
Financial Statements
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Page
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Community Health Systems, Inc. Consolidated Financial Statements:
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Report of Independent Registered Public Accounting Firm
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4 |
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Consolidated Statements of Income for the Years Ended
December 31, 2007, 2006 and 2005
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5 |
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Consolidated Balance Sheets as of December 31, 2007 and 2006
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6 |
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Consolidated Statements of Stockholders Equity for the
Years Ended December 31, 2007, 2006 and 2005
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7 |
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Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007, 2006 and 2005
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8 |
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Notes to Consolidated Financial Statements
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9 |
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3
To the Board of Directors and Stockholders of
Community Health Systems, Inc.
Franklin, Tennessee
We have audited the accompanying consolidated balance sheets of
Community Health Systems, Inc. and subsidiaries (the
Company) as of December 31, 2007 and 2006, and
the related consolidated statements of income,
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2007. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Community Health Systems, Inc. and subsidiaries as of
December 31, 2007 and 2006, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2007, in conformity with
accounting principles generally accepted in the United States of
America.
As discussed in Note 2 to the consolidated financial
statements, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards
No. 123 (Revised 2004), Share Based Payment
effective January 1, 2006, which resulted in the
Company changing the method in which it accounts for share-based
compensation.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
December 31, 2007, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 28, 2008 expressed
an unqualified opinion on the Companys internal control
over financial reporting.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
February 28, 2008
(December 19, 2008 as to the effects of the
restatement discussed on Notes 1 and 17)
4
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
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Year Ended December 31,
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2007
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2006
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2005
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(In thousands, except share and per share data)
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Net operating revenues
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$
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7,127,494
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$
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4,180,136
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$
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3,576,117
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Operating costs and expenses:
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Salaries and benefits
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2,894,977
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1,661,619
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1,421,145
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Provision for bad debts
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897,285
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518,861
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356,120
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Supplies
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944,768
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487,778
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429,846
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Rent
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155,566
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91,943
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82,257
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Other operating expenses
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1,432,998
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855,596
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731,024
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Depreciation and amortization
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316,215
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179,282
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157,262
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Total operating costs and expenses
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6,641,809
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3,795,079
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3,177,654
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Income from operations
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485,685
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385,057
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398,463
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Interest expense, net of interest income of $8,181, $1,779, and
$5,742 in 2007, 2006 and 2005, respectively
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364,533
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94,411
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87,185
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Loss from early extinguishment of debt
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27,388
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4
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Minority interest in earnings
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15,996
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2,795
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3,104
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Equity in earnings of unconsolidated affiliates
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(25,132
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Income from continuing operations before income taxes
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102,900
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287,847
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308,174
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Provision for income taxes
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43,003
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110,152
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119,804
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Income from continuing operations
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59,897
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177,695
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188,370
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Discontinued operations, net of taxes:
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Loss from operations of hospitals sold or held for sale
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(11,067
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(6,873
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(8,737
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Net loss on sale of hospitals and partnership interests
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(2,594
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(2,559
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(7,618
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Impairment of long-lived assets of hospitals held for sale
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(15,947
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(4,471
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Loss on discontinued operations
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(29,608
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(9,432
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(20,826
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Net income
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$
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30,289
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$
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168,263
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$
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167,544
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Earnings per common share basic:
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Income from continuing operations
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$
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0.64
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$
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1.87
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$
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2.13
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Loss on discontinued operations
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$
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(0.32
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$
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(0.10
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$
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(0.24
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Net income
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$
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0.32
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$
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1.77
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$
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1.89
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Earnings per common share diluted:
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Income from continuing operations
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$
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0.63
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$
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1.85
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$
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2.00
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Loss on discontinued operations
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$
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(0.31
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$
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(0.10
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$
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(0.21
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Net income
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$
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0.32
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$
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1.75
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$
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1.79
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Weighted average number of shares outstanding:
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Basic
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93,517,337
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94,983,646
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88,601,168
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Diluted
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94,642,294
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96,232,910
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98,579,977
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See notes to consolidated financial statements.
5
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
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December 31,
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2007
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2006
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(In thousands, except share data)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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132,874
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$
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40,566
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Patient accounts receivable, net of allowance for doubtful
accounts of $1,033,516 and $478,565 in 2007 and 2006,
respectively
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1,533,798
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773,984
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Supplies
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262,903
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113,320
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Prepaid income taxes
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99,417
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Deferred income taxes
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113,741
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13,249
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Prepaid expenses and taxes
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70,339
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32,385
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Other current assets (including assets of hospitals held for
sale of $118,893 at December 31, 2007)
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339,826
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47,880
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Total current assets
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2,552,898
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1,021,384
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Property and equipment:
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Land and improvements
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463,373
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163,988
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Buildings and improvements
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4,166,888
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1,634,893
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Equipment and fixtures
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1,679,979
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831,485
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6,310,240
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2,630,366
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Less accumulated depreciation and amortization
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(797,666
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(643,789
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Property and equipment, net
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5,512,574
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1,986,577
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Goodwill
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4,247,714
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1,336,525
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Other assets, net of accumulated amortization of $100,556 and
$92,921 in 2007 and 2006, respectively (including assets of
hospitals held for sale of $362,546 at December 31, 2007)
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1,180,457
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162,093
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Total assets
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$
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13,493,643
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$
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4,506,579
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Current maturities of long-term debt
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$
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20,710
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$
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35,396
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Accounts payable
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492,693
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247,747
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Current income taxes payable
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7,626
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Accrued liabilities:
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Employee compensation
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403,598
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162,188
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Interest
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153,832
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7,122
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Other (including liabilities of hospitals held for sale of
$67,606 at December 31, 2007)
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377,102
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115,204
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Total current liabilities
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1,447,935
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575,283
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Long-term debt
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9,077,367
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1,905,781
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Deferred income taxes
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407,947
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141,472
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Other long-term liabilities
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483,459
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136,811
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Minority interests in equity of consolidated subsidiaries
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366,131
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23,559
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Commitments and contingencies
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Stockholders equity:
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Preferred stock, $.01 par value per share,
100,000,000 shares authorized; none issued
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Common stock, $.01 par value per share,
300,000,000 shares authorized; 96,611,085 shares
issued and 95,635,536 shares outstanding at
December 31, 2007 and 95,026,494 shares issued and
94,050,945 shares outstanding at December 31, 2006
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966
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950
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Additional paid-in capital
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1,240,308
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1,195,947
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Treasury stock, at cost, 975,549 shares at
December 31, 2007 and 2006
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(6,678
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(6,678
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Unearned stock compensation
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Accumulated other comprehensive income
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(81,737
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5,798
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Retained earnings
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557,945
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527,656
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Total stockholders equity
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1,710,804
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1,723,673
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Total liabilities and stockholders equity
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$
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13,493,643
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$
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4,506,579
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See notes to consolidated financial statements.
6
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Unearned
|
|
|
Other
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Treasury Stock
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
(Accumulated
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Compensation
|
|
|
Income (Loss)
|
|
|
Deficit)
|
|
|
Total
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
|
BALANCE, December 31, 2004
|
|
|
88,591,733
|
|
|
$
|
886
|
|
|
$
|
1,047,888
|
|
|
|
(975,549
|
)
|
|
$
|
(6,678
|
)
|
|
$
|
|
|
|
$
|
6,046
|
|
|
$
|
191,849
|
|
|
$
|
1,239,991
|
|
|
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,544
|
|
|
|
167,544
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
expense of $5,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,923
|
|
|
|
|
|
|
|
8,923
|
|
|
|
|
|
Net change in fair value of available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222
|
|
|
|
|
|
|
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,145
|
|
|
|
167,544
|
|
|
|
176,689
|
|
|
|
|
|
Repurchases of common stock
|
|
|
(2,239,700
|
)
|
|
|
(22
|
)
|
|
|
(79,830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79,852
|
)
|
|
|
|
|
Issuance of common stock in connection with the exercise of
options
|
|
|
3,134,721
|
|
|
|
31
|
|
|
|
49,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,574
|
|
|
|
|
|
Issuance of common stock in connection with the conversion of
convertible debt
|
|
|
4,495,083
|
|
|
|
44
|
|
|
|
148,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148,620
|
|
|
|
|
|
Restricted stock grant
|
|
|
558,000
|
|
|
|
6
|
|
|
|
18,160
|
|
|
|
|
|
|
|
|
|
|
|
(18,160
|
)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Tax benefit from exercise of options
|
|
|
|
|
|
|
|
|
|
|
24,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,453
|
|
|
|
|
|
Earned stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,956
|
|
|
|
|
|
|
|
|
|
|
|
4,956
|
|
|
|
|
|
Miscellaneous
|
|
|
|
|
|
|
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, December 31, 2005
|
|
|
94,539,837
|
|
|
$
|
945
|
|
|
$
|
1,208,930
|
|
|
|
(975,549
|
)
|
|
$
|
(6,678
|
)
|
|
$
|
(13,204
|
)
|
|
$
|
15,191
|
|
|
$
|
359,393
|
|
|
$
|
1,564,577
|
|
|
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168,263
|
|
|
|
168,263
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
benefit of $931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,654
|
)
|
|
|
|
|
|
|
(1,654
|
)
|
|
|
|
|
Net change in fair value of available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
562
|
|
|
|
|
|
|
|
562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,092
|
)
|
|
|
168,263
|
|
|
|
167,171
|
|
|
|
|
|
Adjustment to adopt FASB statement No. 158, net of tax
benefit of $5,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,301
|
)
|
|
|
|
|
|
|
(8,301
|
)
|
|
|
|
|
Repurchases of common stock
|
|
|
(5,000,000
|
)
|
|
|
(50
|
)
|
|
|
(176,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(176,315
|
)
|
|
|
|
|
Issuance of common stock in connection with the exercise of
options
|
|
|
867,833
|
|
|
|
9
|
|
|
|
14,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,573
|
|
|
|
|
|
Issuance of common stock in connection with the conversion of
convertible debt
|
|
|
4,074,510
|
|
|
|
41
|
|
|
|
137,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,198
|
|
|
|
|
|
Tax benefit from exercise of options
|
|
|
|
|
|
|
|
|
|
|
4,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,750
|
|
|
|
|
|
Share-based compensation
|
|
|
544,314
|
|
|
|
5
|
|
|
|
20,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,073
|
|
|
|
|
|
Reclassification of unearned stock compensation
|
|
|
|
|
|
|
|
|
|
|
(13,257
|
)
|
|
|
|
|
|
|
|
|
|
|
13,204
|
|
|
|
|
|
|
|
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, December 31, 2006
|
|
|
95,026,494
|
|
|
$
|
950
|
|
|
$
|
1,195,947
|
|
|
|
(975,549
|
)
|
|
$
|
(6,678
|
)
|
|
$
|
|
|
|
$
|
5,798
|
|
|
$
|
527,656
|
|
|
$
|
1,723,673
|
|
|
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,289
|
|
|
|
30,289
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
benefit of $51,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(91,063
|
)
|
|
|
|
|
|
|
(91,063
|
)
|
|
|
|
|
Net change in fair value of available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
|
|
|
|
|
|
237
|
|
|
|
|
|
Adjustment to pension liability, net of tax benefit of $496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,291
|
|
|
|
|
|
|
|
3,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,535
|
)
|
|
|
30,289
|
|
|
|
(57,246
|
)
|
|
|
|
|
Issuance of common stock in connection with the exercise of
options
|
|
|
321,535
|
|
|
|
3
|
|
|
|
8,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,365
|
|
|
|
|
|
Tax benefit from exercise of options
|
|
|
|
|
|
|
|
|
|
|
(2,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,760
|
)
|
|
|
|
|
Share-based compensation
|
|
|
1,263,056
|
|
|
|
13
|
|
|
|
38,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, December 31, 2007
|
|
|
96,611,085
|
|
|
$
|
966
|
|
|
$
|
1,240,308
|
|
|
|
(975,549
|
)
|
|
$
|
(6,678
|
)
|
|
$
|
|
|
|
$
|
(81,737
|
)
|
|
$
|
557,945
|
|
|
$
|
1,710,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
30,289
|
|
|
$
|
168,263
|
|
|
$
|
167,544
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
332,580
|
|
|
|
188,771
|
|
|
|
166,162
|
|
Deferred income taxes
|
|
|
(39,894
|
)
|
|
|
(25,228
|
)
|
|
|
9,889
|
|
Stock compensation expense
|
|
|
38,771
|
|
|
|
20,073
|
|
|
|
4,957
|
|
Excess tax benefits relating to stock-based compensation
|
|
|
(1,216
|
)
|
|
|
(6,819
|
)
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
27,388
|
|
|
|
|
|
|
|
|
|
Minority interest in earnings
|
|
|
15,996
|
|
|
|
2,795
|
|
|
|
3,104
|
|
Impairment on hospital held for sale
|
|
|
19,044
|
|
|
|
|
|
|
|
6,718
|
|
Loss on sale of hospitals
|
|
|
3,954
|
|
|
|
3,937
|
|
|
|
6,295
|
|
Other non-cash expenses, net
|
|
|
19,017
|
|
|
|
500
|
|
|
|
740
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient accounts receivable
|
|
|
131,300
|
|
|
|
(71,141
|
)
|
|
|
(47,455
|
)
|
Supplies, prepaid expenses and other current assets
|
|
|
(31,977
|
)
|
|
|
(4,544
|
)
|
|
|
(16,838
|
)
|
Accounts payable, accrued liabilities and income taxes
|
|
|
125,959
|
|
|
|
52,151
|
|
|
|
84,956
|
|
Other
|
|
|
16,527
|
|
|
|
21,497
|
|
|
|
24,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
687,738
|
|
|
|
350,255
|
|
|
|
411,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment
|
|
|
(7,018,048
|
)
|
|
|
(384,618
|
)
|
|
|
(158,379
|
)
|
Purchases of property and equipment
|
|
|
(522,785
|
)
|
|
|
(224,519
|
)
|
|
|
(188,365
|
)
|
Disposition of hospitals and other ancillary operations
|
|
|
109,996
|
|
|
|
750
|
|
|
|
51,998
|
|
Proceeds from sale of equipment
|
|
|
4,650
|
|
|
|
4,480
|
|
|
|
2,325
|
|
Increase in other non-operating assets
|
|
|
(72,671
|
)
|
|
|
(36,350
|
)
|
|
|
(34,851
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(7,498,858
|
)
|
|
|
(640,257
|
)
|
|
|
(327,272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
8,214
|
|
|
|
14,573
|
|
|
|
49,580
|
|
Stock buy-back
|
|
|
|
|
|
|
(176,316
|
)
|
|
|
(79,853
|
)
|
Deferred financing costs
|
|
|
(182,954
|
)
|
|
|
(2,153
|
)
|
|
|
(1,259
|
)
|
Excess tax benefits relating to stock-based compensation
|
|
|
1,216
|
|
|
|
6,819
|
|
|
|
|
|
Redemption of convertible notes
|
|
|
|
|
|
|
(128
|
)
|
|
|
(298
|
)
|
Proceeds from minority investors in joint ventures
|
|
|
2,351
|
|
|
|
6,890
|
|
|
|
1,383
|
|
Redemption of minority investments in joint ventures
|
|
|
(1,356
|
)
|
|
|
(915
|
)
|
|
|
(3,242
|
)
|
Distribution to minority investors in joint ventures
|
|
|
(6,645
|
)
|
|
|
(3,220
|
)
|
|
|
(1,939
|
)
|
Borrowings under Credit Agreement
|
|
|
9,221,627
|
|
|
|
1,031,000
|
|
|
|
|
|
Repayments of long-term indebtedness
|
|
|
(2,139,025
|
)
|
|
|
(650,090
|
)
|
|
|
(26,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
6,903,428
|
|
|
|
226,460
|
|
|
|
(62,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
92,308
|
|
|
|
(63,542
|
)
|
|
|
21,610
|
|
Cash and cash equivalents at beginning of period
|
|
|
40,566
|
|
|
|
104,108
|
|
|
|
82,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
132,874
|
|
|
$
|
40,566
|
|
|
$
|
104,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
8
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
|
1.
|
Business
and Summary of Significant Accounting Policies
|
Business. Community Health Systems, Inc.,
through its subsidiaries (collectively the Company),
owns, leases and operates acute care hospitals in non-urban and
select urban markets. As of December 31, 2007, included in
our continuing operations, the Company owned, leased or operated
115 hospitals, licensed for 16,971 beds in 27 states.
Pennsylvania and Texas represent the only areas of geographic
concentration. Net operating revenues generated by the
Companys hospitals in Pennsylvania, as a percentage of
consolidated net operating revenues, were 13.1% in 2007, 22.0%
in 2006 and 23.1% in 2005. Net operating revenues generated by
the Companys hospitals in Texas, as a percentage of
consolidated net operating revenues, were 13.0% in 2007, 10.4%
in 2006 and 11.6% in 2005.
Use of Estimates. The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates under different assumptions or conditions.
Principles of Consolidation. The consolidated
financial statements include the accounts of the Company, its
subsidiaries, all of which are controlled by the Company through
majority voting control, and variable interest entities for
which the Company is the primary beneficiary. All significant
intercompany accounts and transactions have been eliminated.
Certain of the subsidiaries have minority stockholders. The
amount of minority interest in equity is disclosed separately on
the consolidated balance sheets and minority interest in
earnings is disclosed separately on the consolidated statements
of income.
Cost of Revenue. The majority of the
Companys operating expenses are cost of
revenue items. Operating costs that could be classified as
general and administrative by the Company would include the
Companys corporate office costs at the Companys
Franklin, Tennessee and Plano, Texas offices, which were
$133.4 million, $88.9 million and $67.5 million
for the years ended December 31, 2007, 2006 and 2005,
respectively. Included in these amounts is stock-based
compensation of $38.8 million, $20.1 million and
$5.0 million for the years ended December 31, 2007,
2006 and 2005, respectively.
Cash Equivalents. The Company considers highly
liquid investments with original maturities of three months or
less to be cash equivalents.
Supplies. Supplies, principally medical
supplies, are stated at the lower of cost
(first-in,
first-out basis) or market.
Marketable Securites. The Company accounts for
marketable securities in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt
and Equity Securities. The Companys marketable
securities are classified as trading or available-for-sale.
Available-for-sale securities are carried at fair value as
determined by quoted market prices, with unrealized gains and
losses reported as a separate component of stockholders
equity. Trading securities are reported at fair value with
unrealized gains and losses included in earnings. Interest and
dividends on securities classified as available-for-sale or
trading are included in net revenue and were not material in all
periods presented. Accumulated other comprehensive income
included an unrealized gain of $0.2 million and
$0.6 million at December 31, 2007 and
December 31, 2006, respectively, related to these
available-for-sale securities.
Property and Equipment. Property and equipment
are recorded at cost. Depreciation is recognized using the
straight-line method over the estimated useful lives of the land
and improvements (2 to 15 years; weighted average useful
life is 14 years), buildings and improvements (5 to
40 years; weighted average useful life is 24 years)
and equipment and fixtures (4 to 18 years; weighted average
useful life is 8 years). Costs capitalized as construction
in progress were $457.5 million and $61.2 million at
December 31, 2007 and 2006,
9
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
respectively. Expenditures for renovations and other significant
improvements are capitalized; however, maintenance and repairs
which do not improve or extend the useful lives of the
respective assets are charged to operations as incurred.
Interest capitalized in accordance with SFAS No. 34,
Capitalization of Interest Cost, was
$19.0 million, $3.0 million and $2.1 million for
the years ended December 31, 2007, 2006 and 2005,
respectively. Net property and equipment additions included in
accounts payable were $21.4 million, $16.9 million and
$0.1 million for the years ended December 31, 2007,
2006 and 2005, respectively.
The Company also leases certain facilities and equipment under
capital leases (see Notes 3 and 8). Such assets are
amortized on a straight-line basis over the lesser of the term
of the lease or the remaining useful lives of the applicable
assets.
Goodwill. Goodwill represents the excess cost
over the fair value of net assets acquired. Goodwill arising
from business combinations is accounted for under the provisions
of SFAS No. 141, Business Combinations
(SFAS No. 141), and SFAS No. 142,
Goodwill and Other Intangible Assets
(SFAS No. 142), and is not amortized.
SFAS No. 142 requires goodwill to be evaluated for
impairment at the same time every year and when an event occurs
or circumstances change such that it is reasonably possible that
an impairment may exist. The Company has selected
September 30th as its annual testing date.
Other Assets. Other assets consist of costs
associated with the issuance of debt, which are included in
interest expense over the life of the related debt using the
effective interest method, and costs to recruit physicians to
the Companys markets, which are deferred and amortized in
amortization expense over the term of the respective physician
recruitment contract, which is generally three years. Long-term
assets held for sale at December 31, 2007 are also included
in other assets.
Third-Party Reimbursement. Net patient service
revenue is reported at the estimated net realizable amount from
patients, third party payors and others for services rendered.
Net operating revenues include amounts estimated by management
to be reimbursable by Medicare and Medicaid under prospective
payment systems, provisions of cost-reimbursement and other
payment methods. Approximately 39.3% of net operating revenues
for the year ended December 31, 2007, 41.5% of net
operating revenues for the year ended December 31, 2006 and
43.0% of net operating revenues for the year ended
December 31, 2005, are related to services rendered to
patients covered by the Medicare and Medicaid programs. Revenues
from Medicare outlier payments are included in the amounts
received from Medicare and are approximately 0.42% of net
operating revenues for 2007, 0.44% of net operating revenues for
2006, and 0.47% for 2005. In addition, the Company is reimbursed
by non-governmental payors using a variety of payment
methodologies. Amounts received by the Company for treatment of
patients covered by such programs are generally less than the
standard billing rates. The differences between the estimated
program reimbursement rates and the standard billing rates are
accounted for as contractual adjustments, which are deducted
from gross revenues to arrive at net operating revenues. These
net operating revenues are an estimate of the net realizable
value due from these payors. Final settlements under certain of
these programs are subject to adjustment based on administrative
review and audit by third parties. Adjustments to the estimated
billings are recorded in the periods that such adjustments
become known. Adjustments to previous program reimbursement
estimates are accounted for as contractual allowance adjustments
and reported in the periods in which final settlements are
determined. Adjustments related to final settlements or appeals
increased revenue by an insignificant amount in each of the
years ended December 31, 2007, 2006 and 2005. Amounts due
to third-party payors were $73 million as of
December 31, 2007 and $55 million as of
December 31, 2006 and are included in accrued
liabilities-other in the accompanying consolidated balance
sheets. Substantially all Medicare and Medicaid cost reports are
final settled through 2005.
Net Operating Revenues. Net operating revenues
are recorded net of provisions for contractual allowance of
approximately $16.839 billion, $10.024 billion and
$8.401 billion in 2007, 2006 and 2005, respectively. Net
operating revenues are recognized when services are provided and
are reported at the estimated net realizable amount from
patients, third party payors and others for services rendered.
Also
10
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
included in the provision for contractual allowance shown above
is the value of administrative and other discounts provided to
self-pay patients eliminated from net operating revenues which
was $282.5 million, $100.3 million and
$77.9 million for the years ended December 31, 2007,
2006 and 2005, respectively. In the ordinary course of business
the Company renders services to patients who are financially
unable to pay for hospital care. Included in the provision for
contractual allowance shown above, is the value (at the
Companys standard charges) of these services to patients
who are unable to pay that is eliminated from net operating
revenues when it is determined they qualify under the
Companys charity care policy. The value of these services
was $354.8 million, $214.2 million and
$174.2 million for the years ended December 31, 2007,
2006 and 2005, respectively. In the fourth quarter of 2007, in
conjunction with an analysis of the net realizable value of
accounts receivable, which included updating the Companys
analysis of historical cash collections, as well as conforming
estimation methodologies with those of the former Triad
hospitals, the Company revised its methodology whereby the
Company has revised its estimate of contractual allowances for
estimated amounts of self-pay accounts receivable that will
ultimately qualify as charity care, or that will ultimately
qualify for Medicaid, indigent care or other specific
governmental reimbursement. Previous estimates of uncollectible
amounts for such receivables were included in the Companys
bad debt reserves for each period. The impact of these changes
in estimates decreased net operating revenue approximately
$96.3 million for the year ended December 31, 2007.
Allowance for Doubtful Accounts. Accounts
receivable are reduced by an allowance for amounts that could
become uncollectible in the future. Substantially all of the
Companys receivables are related to providing healthcare
services to its hospitals patients.
The Company experienced a significant increase in self-pay
volume and related revenue, combined with lower cash collections
during the quarter ended September 30, 2006. The Company
believes this trend reflected an increased collection risk from
self-pay accounts, and as a result the Company performed a
review and an alternative analysis of the adequacy of its
allowance for doubtful accounts. Based on this review, the
Company recorded a $65.0 million increase to its allowance
for doubtful accounts to maintain an adequate allowance for
doubtful accounts as of September 30, 2006. The Company
believed that the increase in self-pay accounts is a result of
current economic trends, including an increase in the number of
uninsured patients, reduced enrollment under Medicaid programs
such as Tenncare, and higher deductibles and co-payments for
patients with insurance.
In conjunction with recording the $65.0 million increase to
the allowance for doubtful accounts, the Company changed its
methodology for estimating its allowance for doubtful accounts
effective September 30, 2006, as follows: The Company
reserved a percentage of all self-pay accounts receivable
without regard to aging category, based on collection history
adjusted for expected recoveries and, if present, other changes
in trends. For all other payor categories the Company reserved
100% of all accounts aging over 365 days from the date of
discharge. Previously, the Company estimated its allowance for
doubtful accounts by reserving all accounts aging over
150 days from the date of discharge without regard to payor
class. The Company believes its revised methodology provided a
better approach to reflect changes in payor mix and historical
collection patterns and to respond to changes in trends.
During the quarter ended December 31, 2007, in conjunction
with the Companys ongoing process of monitoring the net
realizable value of its accounts receivable, as well as
integrating the methodologies, data and assumptions used by the
former Triad management, the Company performed various analyses
including updating a review of historical cash collections. As a
result of these analyses, the Company noted a deterioration in
certain key cash collection indicators. The acquisition of Triad
also provided additional data and a comparative and larger
population on which to base the Companys estimates. As a
result of the lower estimated collectability indicated by the
updated analyses, the Company has recorded an increase to its
contractual reserves of $96.3 million (as described above)
and an increase to its allowance for doubtful accounts as of
December 31, 2007 of approximately $70.1 million. The
Company believes this lower
11
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
collectability is primarily the result of an increase in the
number of patients qualifying for charity care, reduced
enrollment in certain state Medicaid programs and an increase in
the number of indigent non-resident aliens.
The Company believes the revised methodology provides a better
approach to estimating changes in payor mix, continued increases
in charity and indigent care as well as the monitoring of
historical collection patterns. The revised accounting
methodology and the adequacy of resulting estimates will
continue to be reviewed by monitoring accounts receivable
write-offs, monitoring cash collections as a percentage of
trailing net revenues less provision for bad debts, monitoring
historical cash collection trends, as well as analyzing current
period net revenue and admissions by payor classification, aged
accounts receivable by payor, days revenue outstanding, and the
impact of recent acquisitions and dispositions.
Concentrations of Credit Risk. The Company
grants unsecured credit to its patients, most of whom reside in
the service area of the Companys facilities and are
insured under third-party payor agreements. Because of the
economic diversity of the Companys facilities and
non-governmental third-party payors, Medicare represents the
only significant concentration of credit risk from payors.
Accounts receivable, net of contractual allowances, from
Medicare were $302.1 million and $116.8 million as of
December 31, 2007 and 2006, respectively, representing
11.8% and 9.3% of consolidated net accounts receivable, before
allowance for doubtful accounts, as of December 31, 2007
and 2006, respectively.
Professional Liability Insurance Claims. The
Company accrues for estimated losses resulting from professional
liability. The accrual, which includes an estimate for incurred
but not reported claims, is based on historical loss patterns
and actuarially-determined projections and is discounted to its
net present value. To the extent that subsequent claims
information varies from managements estimates, the
liability is adjusted currently.
Accounting for the Impairment or Disposal of Long-Lived
Assets. In accordance with
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets
(SFAS No. 144), whenever events or changes
in circumstances indicate that the carrying values of certain
long-lived assets may be impaired, the Company projects the
undiscounted cash flows expected to be generated by these
assets. If the projections indicate that the reported amounts
are not expected to be recovered, such amounts are reduced to
their estimated fair value based on a quoted market price, if
available, or an estimate based on valuation techniques
available in the circumstances.
Income Taxes. The Company accounts for income
taxes under the asset and liability method, in which deferred
income tax assets and liabilities are recognized for the tax
consequences of temporary differences by applying
enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. The effect on
deferred taxes of a change in tax rates is recognized in the
consolidated statement of income during the period in which the
tax rate change becomes law.
Comprehensive Income. Comprehensive income is
the change in equity of a business enterprise during a period
from transactions and other events and circumstances from
non-owner sources.
12
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accumulated Other Comprehensive Income consists of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Change in Fair
|
|
|
Change in Fair
|
|
|
Adjustment
|
|
|
Other
|
|
|
|
Value of Interest
|
|
|
Value of Available
|
|
|
to Pension
|
|
|
Comprehensive
|
|
|
|
Rate Swaps
|
|
|
for Sale Securities
|
|
|
Liability
|
|
|
Income
|
|
|
Balance as of December 31, 2005
|
|
$
|
14,969
|
|
|
$
|
222
|
|
|
$
|
|
|
|
$
|
15,191
|
|
2006 Activity, net of tax
|
|
|
(1,654
|
)
|
|
|
562
|
|
|
|
(8,301
|
)
|
|
|
(9,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2006
|
|
$
|
13,315
|
|
|
$
|
784
|
|
|
$
|
(8,301
|
)
|
|
$
|
5,798
|
|
2007 Activity, net of tax
|
|
|
(91,063
|
)
|
|
|
237
|
|
|
|
3,291
|
|
|
|
(87,535
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
$
|
(77,748
|
)
|
|
$
|
1,021
|
|
|
$
|
(5,010
|
)
|
|
$
|
(81,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Reporting. SFAS No. 131,
Disclosures About Segments of an Enterprise and Related
Information (SFAS No. 131), requires
that a public company report annual and interim financial and
descriptive information about its reportable operating segments.
Operating segments, as defined, are components of an enterprise
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS No. 131 allows aggregation of similar operating
segments into a single reportable operating segment if the
businesses have similar economic characteristics and are
considered similar under the criteria established by
SFAS No. 131.
Prior to the acquisition of Triad Hospitals, Inc.
(Triad), the Company aggregated its operating
segments into one reportable segment as all of its operating
segments had similar services, had similar types of patients,
operated in a consistent manner and had similar economic and
regulatory characteristics. In connection with the Triad
acquisition, certain aspects of the Companys
organizational structure and the information that is reviewed by
the chief operating decision maker have changed. As a result,
management has determined that the Company now operates in three
distinct operating segments, represented by the hospital
operations (which includes our acute care hospitals and related
healthcare entities that provide inpatient and outpatient health
care services), the home health agencies operations (which
provide outpatient care generally in the patients home),
and the hospital management services business (which provides
executive management and consulting services to independent
acute care hospitals). SFAS No. 131 requires
(1) that financial information be disclosed for operating
segments that meet a 10% quantitative threshold of the
consolidated totals of net revenue, profit or loss, or total
assets; and (2) that the individual reportable segments
disclosed contribute at least 75% of total consolidated net
revenue. Based on these measures, only the hospital operations
segment meets the criteria as a separate reportable segment.
Financial information for the home health agencies and
management services segments do not meet the quantitative
thresholds defined in SFAS No. 131 and are therefore
combined with corporate into the all other reportable segment.
The financial information from prior years has been presented in
Note 13 to reflect this change in the composition of our
reportable operating segments.
Derivative Instruments and Hedging
Activities. In accordance with
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS No.
133), as amended, the Company records derivative
instruments (including certain derivative instruments embedded
in other contracts) on the consolidated balance sheet as either
an asset or liability measured at its fair value. Changes in a
derivatives fair value are recorded each period in
earnings or other comprehensive income (OCI),
depending on whether the derivative is designated and is
effective as a hedged transaction, and on the type of hedge
transaction. Changes in the fair value of derivative instruments
recorded to OCI are reclassified to earnings in the period
affected by the underlying hedged item. Any portion of the fair
value of a derivative instrument determined to be ineffective
under the standard is recognized in current earnings.
13
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company has entered into several interest rate swap
agreements subject to the scope of this pronouncement. See
Note 6 for further discussion about the swap transactions.
New Accounting Pronouncements. In June 2006,
the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109 (FIN 48),
which prescribes a recognition threshold and measurement
attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on
de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition.
FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company adopted FIN 48 as of
January 1, 2007. The adoption of this interpretation has
not had a material effect on the Companys consolidated
results of operations or consolidated financial position.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS No. 157), which defines fair value,
provides a framework for measuring fair value, and expands the
disclosures required for fair value measurements.
SFAS No. 157 applies to other accounting
pronouncements that require fair value measurement; it does not
require any new fair value measurements. SFAS No. 157
is effective for fiscal years beginning after November 15,
2007, and is required to be adopted by the Company beginning in
the first quarter of 2008. Although we will continue to evaluate
the application of SFAS No. 157, management does not
currently believe adoption will have a material impact on the
Companys consolidated results of operations or
consolidated financial position.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities Including an Amendment of FASB Statement
No. 115 (SFAS No. 159).
SFAS No. 159 expands the use of fair value accounting
but does not affect existing standards that require assets or
liabilities to be carried at fair value. SFAS No. 159
permits an entity, on a
contract-by-contract
basis, to make an irrevocable election to account for certain
types of financial instruments and warranty and insurance
contracts at fair value, rather than historical cost, with
changes in the fair value, whether realized or unrealized,
recognized in earnings. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company
adopted SFAS No. 159 as of January 1, 2008. The
adoption of this statement is not expected to have a material
effect on the Companys consolidated results of operations
or consolidated financial position.
In December 2007, the FASB issued SFAS No. 141(R),
Business Combinations
(SFAS No. 141(R)).
SFAS No. 141(R) replaces SFAS No. 141 and
addresses the recognition and accounting for identifiable assets
acquired, liabilities assumed, and noncontrolling interests in
business combinations. This standard will require more assets
and liabilities be recorded at fair value and will require
expense recognition (rather than capitalization) of certain
pre-acquisition costs. This standard also will require any
adjustments to acquired deferred tax assets and liabilities
occurring after the related allocation period to be made through
earnings. Furthermore, this standard requires this treatment of
acquired deferred tax assets and liabilities also be applied to
acquisitions occurring prior to the effective date of this
standard. SFAS No. 141(R) is effective for fiscal
years beginning after December 15, 2008 and is required to
be adopted prospectively with no early adoption permitted.
SFAS No. 141(R) will be adopted by the Company in the
first quarter of 2009. The Company is currently assessing the
potential impact that SFAS No. 141(R) will have on its
consolidated results of operations or financial position.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements (SFAS No. 160).
SFAS No. 160 addresses the accounting and reporting
framework for noncontrolling ownership interests in consolidated
subsidiaries of the parent. SFAS No. 160 also
establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent company and the
interests of the noncontrolling owners and that require minority
ownership interests be presented separately within equity in the
consolidated financial statements. SFAS No. 160 is
effective for fiscal years beginning after December 15,
2008, and will be adopted by the Company in the first quarter of
2009. The Company is
14
currently assessing the potential impact that
SFAS No. 160 will have on its consolidated results of
operations or financial position.
Reclassifications. The Company disposed of one
hospital in August 2007, disposed of one hospital in October
2007, disposed of one hospital in November 2007, and designated
twelve hospitals as being held for sale in the fourth quarter of
2007. The operating results of those hospitals have been
classified as discontinued operations on the consolidated
statements of income for all periods presented. There is no
effect on net income for all periods presented related to the
reclassifications made for the discontinued operations. The
presentation of gross property and equipment and accumulated
depreciation and amortization at December 31, 2007 has been
corrected to reflect certain assets acquired from Triad. This
correction increased both gross property and equipment and
accumulated depreciation and amortization by $108.3 million and
did not impact the net balance of property and equipment as
previously presented on the accompanying consolidated balance
sheet. The correction to the parenthetical disclosure of assets of
hospitals held for sale at
December 31, 2007 on the accompanying consolidated balance sheet
decreased the assets
held for sale by $54.6 million and increased investments in unconsolidated affiliates by
$54.6 million, related to those hospitals sold during the first quarter of 2008. This
correction did not change the consolidated total of Other assets, net as presented in the
accompanying consolidated balance sheet. Note 3 (Long-Term Leases, Acquisitions and
Divestitures of Hospitals) and Note 12 (Equity Investments) were revised accordingly to
reflect this correction. The presentation of certain other prior year
amounts have been changed. These changes in presentation are immaterial
to the Company's consolidated financial statements.
|
|
2.
|
Accounting
for Stock-Based Compensation
|
The Company adopted the provisions of SFAS No. 123(R),
Share-Based Payments
(SFAS No. 123(R)) on January 1, 2006,
electing to use the modified prospective method for transition
purposes. The modified prospective method requires that
compensation expense be recorded for all unvested stock options
and share awards that subsequently vest or are modified, without
restatement of prior periods. Prior to January 1, 2006, the
Company accounted for stock-based compensation using the
recognition and measurement principles of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations (APB
No. 25), and provided the pro-forma disclosure
requirements of SFAS No. 123 Accounting for
Stock-Based Compensation and SFAS No. 148
Accounting for Stock-Based Compensation Transition and
Disclosures an Amendment of FASB Statement
No. 123 (SFAS No. 148). Under
APB No. 25, when the exercise price of the Companys
stock was equal to the market price of the underlying stock on
the date of grant, no compensation expense was recognized.
The pro-forma table below reflects net income and earnings per
share had the Company applied the fair value recognition
provisions of SFAS No. 123 for the year ended
December 31, 2005, prior to the adoption of
SFAS No. 123(R) (in thousands, except per share data):
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
Net Income:
|
|
$
|
167,544
|
|
Add: Stock-Based compensation expense recognized under APB No.
25, net of tax
|
|
|
3,493
|
|
Deduct: Total stock-based compensation under fair value based
method for all awards, net of tax
|
|
$
|
14,232
|
|
|
|
|
|
|
Pro-forma net income
|
|
$
|
156,805
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
Basic as reported
|
|
$
|
1.89
|
|
|
|
|
|
|
Basic proforma
|
|
$
|
1.77
|
|
|
|
|
|
|
Diluted as reported
|
|
$
|
1.79
|
|
|
|
|
|
|
Diluted proforma
|
|
$
|
1.68
|
|
|
|
|
|
|
On September 22, 2005, the Compensation Committee of the
Board of Directors of the Company approved an immediate
acceleration of the vesting of unvested stock options awarded to
employees and officers, including executive officers, on each of
three grant dates, December 10, 2002, February 25,
2003, and May 22, 2003. Each of the grants accelerated had
a three-year vesting period and would have otherwise become
fully vested on their respective anniversary dates no later than
May 22, 2006. All other terms and
15
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
conditions applicable to the outstanding stock option grants
remain in effect. A total of 1,235,885 stock options, with a
weighted exercise price of $20.26 per share, were accelerated.
The accelerated options were issued under the Community Health
Systems, Inc. Amended and Restated 2000 Stock Option and Award
Plan (the 2000 Plan). No performance shares or units
or incentive stock options have been granted under the 2000
Plan. Options granted to non-employee directors of the Company
and restricted shares were not affected by this action. The
Compensation Committees decision to accelerate the vesting
of the affected options was based primarily on the relatively
short period of time until such stock options otherwise become
fully vested making them no longer a significant motivator for
retention and the fact the Company anticipated that up to
approximately $3.8 million of compensation expense
($2.3 million, net of tax) associated with certain of these
stock options would have otherwise been recognized in the first
two quarters of 2006 pursuant to SFAS No. 123(R) would
be avoided.
Since the Company accounted for its stock options prior to
January 1, 2006 using the intrinsic value method of
accounting prescribed in APB No. 25, the accelerated
vesting did not result in the recognition of compensation
expense in net income for the year ended December 31, 2005.
However, in accordance with the disclosure requirements of
SFAS No. 148, the pro-forma results presented in the
table above include approximately $5.9 million
($3.6 million, net of tax) of compensation expense for the
year ended December 31, 2005, resulting from the vesting
acceleration.
Stock-based compensation awards are granted under the 2000 Plan.
The 2000 Plan allows for the grant of incentive stock options
intended to qualify under Section 422 of the Internal
Revenue Code as well as stock options which do not so qualify,
stock appreciation rights, restricted stock, performance units
and performance shares, phantom stock awards and share awards.
Persons eligible to receive grants under the 2000 Plan include
the Companys directors, officers, employees and
consultants. To date, the options granted under the 2000 Plan
are nonqualified stock options for tax purposes.
Generally, vesting of these granted options occurs in one-third
increments on each of the first three anniversaries of the award
date, except for options granted on July 25, 2007, which
vests equally on the first two anniversaries of the award date.
Options granted prior to 2005 have a 10 year contractual
term and options granted in 2005, 2006 and 2007 have an
8 year contractual term. The exercise price of options
granted to employees under the 2000 Plan were equal to the fair
value of the Companys common stock on the option grant
date. As of December 31, 2007, 5,849,771 shares of
unissued common stock remain reserved for future grants under
the 2000 Plan. The Company also has options outstanding under
its Employee Stock Option Plan (the 1996 Plan).
These options are fully vested and exercisable and no additional
grants of options will be made under the 1996 Plan.
The following table reflects the impact of total compensation
expense related to stock-based equity plans under
SFAS No. 123(R) for periods beginning January 1,
2006, and under APB No. 25 for the year ended
December 31, 2005, on the reported operating results for
the respective periods (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Effect on income from continuing operations before income taxes
|
|
$
|
(38,771
|
)
|
|
$
|
(20,073
|
)
|
|
$
|
(4,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on net income
|
|
$
|
(23,541
|
)
|
|
$
|
(12,762
|
)
|
|
$
|
(3,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on net income per share-diluted
|
|
$
|
(0.25
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFAS No. 123(R) also requires the benefits of tax
deductions in excess of the recognized tax benefit on
compensation expense to be reported as a financing cash flow,
rather than as an operating cash flow as required under APB
No. 25 and related interpretations. This requirement
reduced the Companys net operating cash flows and
increased the Companys financing cash flows by
$1.2 million and $6.8 million for the years
16
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
ended December 31, 2007 and 2006. In addition, the
Companys deferred compensation cost at December 31,
2005, of $13.2 million, arising from the issuance of
restricted stock in 2005 and recorded as a component of
stockholders equity as required under APB No. 25, was
reclassified into additional paid-in capital upon the adoption
of SFAS No. 123(R).
At December 31, 2007, $80.4 million of unrecognized
stock-based compensation expense from all outstanding unvested
stock options and restricted stock is expected to be recognized
over a weighted-average period of 18.4 months. There were
no modifications to awards during 2007 or 2006.
The fair value of stock options was estimated using the Black
Scholes option pricing model with the assumptions and
weighted-average fair values during the years ended
December 31, 2007 and 2006, as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Expected volatility
|
|
|
24.4
|
%
|
|
|
24.2
|
%
|
Expected dividends
|
|
|
0
|
|
|
|
0
|
|
Expected term
|
|
|
4 years
|
|
|
|
4 years
|
|
Risk-free interest rate
|
|
|
4.48
|
%
|
|
|
4.67
|
%
|
In determining expected term, the Company examined
concentrations of holdings, its historical patterns of option
exercises and forfeitures, as well as forward looking factors,
in an effort to determine if there were any discernable employee
populations. From this analysis, the Company identified two
employee populations, one consisting primarily of certain senior
executives and the other consisting of all other recipients.
The expected volatility rate was estimated based on historical
volatility. In determining expected volatility, the Company also
reviewed the market-based implied volatility of actively traded
options of its common stock and determined that historical
volatility did not differ significantly from the implied
volatility.
The expected life computation is based on historical exercise
and cancellation patterns and forward looking factors, where
present, for each population identified. The risk-free interest
rate is based on the U.S. Treasury yield curve in effect at
the time of the grant. The pre-vesting forfeiture rate is based
on historical rates and forward looking factors for each
population identified. The Company adjusts the estimated
forfeiture rate to its actual experience.
17
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Options outstanding and exercisable under the 1996 Plan and 2000
Plan as of December 31, 2007, and changes during each of
the years in the three-year period ended December 31, 2007
were as follows (in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Value as of
|
|
|
|
|
|
|
Exercise
|
|
|
Term
|
|
|
December 31,
|
|
|
|
Shares
|
|
|
Price
|
|
|
(In Years)
|
|
|
2007
|
|
|
Outstanding at December 31, 2004
|
|
|
7,456,279
|
|
|
$
|
18.03
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,325,700
|
|
|
|
33.02
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(3,134,721
|
)
|
|
|
15.81
|
|
|
|
|
|
|
|
|
|
Forfeited and cancelled
|
|
|
(276,984
|
)
|
|
|
26.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2005
|
|
|
5,370,274
|
|
|
|
22.63
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,151,000
|
|
|
|
38.07
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(865,833
|
)
|
|
|
16.47
|
|
|
|
|
|
|
|
|
|
Forfeited and cancelled
|
|
|
(172,913
|
)
|
|
|
34.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
|
5,482,528
|
|
|
|
26.48
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,544,000
|
|
|
|
37.79
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(295,854
|
)
|
|
|
26.89
|
|
|
|
|
|
|
|
|
|
Forfeited and cancelled
|
|
|
(291,659
|
)
|
|
|
35.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
8,439,015
|
|
|
$
|
30.90
|
|
|
|
6.5 years
|
|
|
$
|
57,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2007
|
|
|
4,024,138
|
|
|
$
|
23.63
|
|
|
|
5.5 years
|
|
|
$
|
53,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant date fair value of stock options
granted during the year ended December 31, 2007 and 2006,
was $10.24 and $10.38, respectively. The aggregate intrinsic
value (the number of in-the-money stock options multiplied by
the difference between the Companys closing stock price on
the last trading day of the reporting period and the exercise
price of the respective stock options) in the table above
represents the amount that would have been received by the
option holders had all option holders exercised their options on
December 31, 2007. This amount changes based on the market
value of the Companys common stock. The aggregate
intrinsic value of options exercised during the year ended
December 31, 2007 and 2006 was $3.5 million and
$18.2 million, respectively. The aggregate intrinsic value
of options vested and expected to vest approximates that of the
outstanding options.
The Company has also awarded restricted stock under the 2000
Plan to various employees and its directors. The restrictions on
these shares generally lapse in one-third increments on each of
the first three anniversaries of the award date, except for
restricted stock granted on July 25, 2007, which
restrictions lapse equally on the first two anniversaries of the
award date. Certain of the restricted stock awards granted to
the Companys senior executives also contain a performance
objective that must be met in addition to the vesting
requirements. If the performance objective is not attained the
awards will be forfeited in their entirety. Once the performance
objective has been attained, restrictions will lapse in
one-third increments on each of the first three anniversaries of
the award date. Notwithstanding the above mentioned performance
objectives and vesting requirements, the restrictions will lapse
earlier in the event of death, disability, termination of
employment by employer for reason other than for cause of the
holder of the restricted stock or in the event of change in
control of the Company. Restricted stock awards subject to
performance standards are not considered outstanding for
purposes of determining earnings per share until the performance
objectives have been satisfied.
18
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restricted stock outstanding under the 2000 Plan as of
December 31, 2007, and changes during each of the years in
the three-year period ended December 31, 2007 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Fair
|
|
|
|
Shares
|
|
|
Value
|
|
|
Unvested at December 31, 2004
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
563,000
|
|
|
|
32.37
|
|
Vested
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(5,000
|
)
|
|
|
32.37
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2005
|
|
|
558,000
|
|
|
|
32.37
|
|
Granted
|
|
|
606,000
|
|
|
|
38.26
|
|
Vested
|
|
|
(185,975
|
)
|
|
|
32.43
|
|
Forfeited
|
|
|
(8,334
|
)
|
|
|
35.93
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2006
|
|
|
969,691
|
|
|
|
36.05
|
|
Granted
|
|
|
1,392,000
|
|
|
|
38.70
|
|
Vested
|
|
|
(384,646
|
)
|
|
|
35.47
|
|
Forfeited
|
|
|
(20,502
|
)
|
|
|
36.73
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2007
|
|
|
1,956,543
|
|
|
|
38.04
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007, there was $50.3 million of
unrecognized stock-based compensation expense related to
unvested restricted stock expected to be recognized over a
weighted-average period of 17.2 months.
Under the Directors Fee Deferral Plan, the Companys
outside directors may elect to receive share equivalent units in
lieu of cash for their directors fee. These units are held
in the plan until the director electing to receive the share
equivalent units retires or otherwise terminates
his/her
directorship with the Company. Share equivalent units are
converted to shares of common stock of the Company at the time
of distribution. The following table represents the amount of
directors fees which were deferred and the equivalent
units into which they converted for each of the respective
periods:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Directors fees earned and deferred into plan
|
|
$
|
129,000
|
|
|
$
|
177,500
|
|
|
|
|
|
|
|
|
|
|
Equivalent units
|
|
|
3,622.531
|
|
|
|
4,843.449
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, there are a total of
13,408.532 units deferred in the plan with an aggregate
fair value of $0.5 million, based on the closing market
price of the Companys common stock at December 31,
2007 of $36.86.
|
|
3.
|
Long-Term
Leases, Acquisitions and Divestitures of Hospitals
|
Triad
Acquisition
On July 25, 2007, the Company completed its acquisition of
Triad. Triad owned and operated 50 hospitals in 17 states
as well as the Republic of Ireland in non-urban and middle
market communities. Immediately following the acquisition, on a
combined basis the Company owned and operated 128 hospitals in
28 states as well as the Republic of Ireland. As of
December 31, 2007, two hospitals acquired from Triad have
been sold and six hospitals acquired from Triad were classified
as held for sale. As a result of its acquisition of Triad,
19
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the Company also provides management and consulting services to
independent hospitals, through its subsidiary, Quorum Health
Resources, LLC, on a contract basis. The Company acquired Triad
for approximately $6.836 billion, including the assumption
of $1.686 billion of existing indebtedness. Prior to
entering the merger agreement, Triad terminated an Agreement and
Plan of Merger that it had entered into on February 4, 2007
(the Prior Merger Agreement) with Panthera Partners,
LLC, Panthera Holdco Corp. and Panthera Acquisition Corporation
(collectively, Panthera). Concurrent with the
termination of the Prior Merger Agreement and pursuant to the
terms thereof, Triad paid a termination fee of $20 million
and out-of-pocket expenses of $18.8 million to Panthera.
The Company reimbursed Triad for the termination fee and the
advance for expense reimbursement paid to Panthera. These
amounts are included in the allocated purchase price of Triad.
In connection with the consummation of the acquisition of Triad,
the Company obtained $7.215 billion of senior secured
financing under a new credit facility (the New Credit
Facility) and its wholly-owned subsidiary CHS/Community
Health Systems, Inc. (CHS/Community Health) issued
$3.021 billion aggregate principal amount of
8.875% senior notes due 2015 (the Notes). The
Company used the net proceeds of $3.000 billion from the
Notes offering and the net proceeds of $6.065 billion of
term loans under the New Credit Facility to acquire the
outstanding shares of Triad, to refinance certain of
Triads indebtedness and the Companys indebtedness,
to complete certain related transactions, to pay certain costs
and expenses of the transactions and for general corporate uses.
This New Credit Facility also provides an additional
$750 million revolving credit facility and a
$400 million delayed draw term loan facility for future
acquisitions, working capital and general corporate purposes. As
of December 31, 2007, the $400 million delayed draw
term loan had been reduced to $300 million at the request
of the Company.
The total cost of the Triad acquisition has been allocated to
the assets acquired and liabilities assumed based upon their
respective preliminary estimated fair values in accordance with
SFAS No. 141. The purchase price represented a premium
over the fair value of the net tangible and identifiable
intangible assets acquired for reasons such as:
|
|
|
|
|
strategically, Triad had operations in five states in which the
Company previously had no operations;
|
|
|
|
the combined company has smaller concentrations of credit risk
through greater geographic diversification;
|
|
|
|
many support functions will be centralized; and
|
|
|
|
duplicate corporate functions will be eliminated.
|
The allocation process requires the analysis of acquired fixed
assets, contracts, contractual commitments, and legal
contingencies to identify and record the fair value of all
assets acquired and liabilities assumed. Because of the
significance of the transaction and proximity to the end of the
current year, the values of certain assets and liabilities are
based on preliminary valuations and are subject to adjustment as
additional information is obtained. Such additional information
includes, but is not limited to: valuations and physical counts
of property and equipment, valuation of equity investments and
intangible assets, valuation of contractual commitments,
finalization of involuntary termination of employees, and review
of open cost report settlement periods. The Company is also
negotiating the termination of certain assumed contracts it
deems unfavorable, such as various physician and service
contracts. Under GAAP, the Company has up to twelve months from
the closing of the acquisition to complete its valuations and
complete contract terminations in order for these terminations
to be considered in the allocation process. The Company expects
to complete the allocation of the total cost of the Triad
acquisition in the second quarter of 2008. Material adjustments
to goodwill may result upon the completion of these matters.
20
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other
Acquisitions
Effective April 1, 2007, the Company completed its
acquisition of Lincoln General Hospital (157 licensed beds),
located in Ruston, Louisiana. The total consideration for this
hospital was approximately $48.7 million, of which
$44.8 million was paid in cash and $3.9 million was
assumed in liabilities. On May 1, 2007, the Company
completed its acquisition of Porter Health, (301 licensed beds),
located in Valparaiso, Indiana, with a satellite campus in
Portage, Indiana and outpatient medical campuses located in
Chesterton, Demotte, and Hebron, Indiana. As part of this
acquisition, the Company has agreed to construct a 225-bed
replacement facility for the Valparaiso hospital no later than
April 2011. The total consideration for Porter Health was
approximately $110.1 million, of which $88.9 million
was paid in cash and $21.2 million was assumed in
liabilities. The Company has estimated its purchase price
allocation relating to these acquisitions resulting in
approximately $1.5 million of goodwill being recorded.
These allocations are preliminary pending, among other things,
finalization of valuation of tangible and intangible assets.
These acquisition transactions were accounted for using the
purchase method of accounting. The allocation of the purchase
price has been determined by the Company based upon available
information and is subject to settling amounts related to
purchased working capital and in some instances final
appraisals. Adjustments to the purchase price allocation are not
expected to be material.
During 2006, the Company acquired through 7 separate purchase
transactions and three capital lease transactions, substantially
all of the assets and working capital of eight hospitals and
three home health agencies. On March 1, 2006, the Company
acquired, through a combination of purchasing certain assets and
entering into a capital lease for other related assets, Forrest
City Hospital, a 118 bed hospital located in Forrest City,
Arkansas. On April 1, 2006, the Company completed the
acquisition of two hospitals from Baptist Health System,
Birmingham, Alabama: Baptist Medical Center DeKalb
(134 beds) and Baptist Medical Center Cherokee (60
beds). On May 1, 2006, the Company acquired Via Christi
Oklahoma Regional Medical Center, a 140 bed hospital located in
Ponca City, Oklahoma. On June 1, 2006, the Company acquired
Mineral Area Regional Medical Center, a 135 bed hospital located
in Farmington, Missouri. On June 30, 2006 the Company
acquired Cottage Home Options, a home health agency and related
business, located in Galesburg, Illinois. On July 1, 2006,
the Company acquired the healthcare assets of Vista Health,
which included Victory Memorial Hospital (336 beds) and St.
Therese Medical Center (71 non-acute care beds), both located in
Waukegan, Illinois. On September 1, 2006, the Company
acquired Humble Texas Home Care, a home health agency located in
Humble, Texas. On October 1, 2006, the Company acquired
Helpsource Home Health, a home health agency located in Wichita
Falls, Texas. On November 1, 2006 the Company acquired
through two separate capital lease transactions, Campbell
Memorial Hospital, a 99 bed hospital located in Weatherford,
Texas and Union County Hospital, a 25 bed hospital located in
Anna, Illinois. The aggregate consideration for these eight
hospitals and three home health agencies totaled approximately
$385.7 million, of which $353.8 million was paid in
cash and $31.9 million was assumed in liabilities. Goodwill
recognized in these transactions totaled $65.6 million,
which is expected to be fully deductible for tax purposes.
During 2005, the Company acquired through four separate purchase
transactions and one capital lease transaction, substantially
all of the assets and working capital of five hospitals. On
March 1, 2005, the Company acquired an 85% controlling
interest in Chestnut Hill Hospital, a 222 bed hospital located
in Philadelphia, Pennsylvania. On June 30, 2005, the
Company acquired, through a capital lease, Bedford County
Medical Center, a 104 bed hospital located in Shelbyville,
Tennessee. On September 30, 2005, the Company acquired the
assets of Newport Hospital and Clinic located in Newport,
Arkansas. This facility, which was previously operated as an 83
bed acute care general hospital, was closed by its former owner
simultaneous with this transaction. The operations of this
hospital were consolidated with Harris Hospital, also located in
Newport, which is owned and operated by a wholly owned
subsidiary of the Company. On October 1, 2005, the Company
acquired Sunbury Community Hospital, a 123 bed hospital located
in Sunbury, Pennsylvania, and Bradley Memorial Hospital, a 251
bed hospital located in Cleveland, Tennessee. The aggregate
consideration for the five hospitals totaled approximately
$176 million, of which $138 million was paid in cash
and
21
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$38 million was assumed in liabilities. Goodwill recognized
in these transactions totaled approximately $51 million,
which is expected to be fully deductible for tax purposes.
The 2006 and 2005 acquisition transactions were accounted for
using the purchase method of accounting. The final allocation of
the purchase price for these acquisitions was determined by the
Company within one year of the date of acquisition.
The table below summarizes the allocations of the purchase price
(including assumed liabilities) for these acquisitions (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Current assets
|
|
$
|
1,675,392
|
|
|
$
|
56,896
|
|
|
$
|
19,144
|
|
Property and equipment
|
|
|
3,699,200
|
|
|
|
262,335
|
|
|
|
110,854
|
|
Goodwill and other intangibles
|
|
|
3,111,711
|
|
|
|
66,490
|
|
|
|
43,619
|
|
Liabilities
|
|
|
1,479,462
|
|
|
|
27,247
|
|
|
|
30,786
|
|
The operating results of the foregoing hospitals have been
included in the consolidated statements of income from their
respective dates of acquisition. The following pro forma
combined summary of operations of the Company gives effect to
using historical information of the operations of the hospitals
purchased in 2007 and 2006 as if the acquisitions had occurred
as of January 1, 2006 (in thousands except per share data):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Pro forma net operating revenues
|
|
$
|
9,623,221
|
|
|
$
|
9,245,489
|
|
Pro forma net income (loss)
|
|
|
(95,598
|
)
|
|
|
150,626
|
|
Pro forma net income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.02
|
)
|
|
$
|
1.59
|
|
Diluted
|
|
$
|
(1.01
|
)
|
|
$
|
1.57
|
|
Pro forma adjustments to net income (loss) include adjustments
to depreciation and amortization expense, net of the related tax
effect, based on the estimated fair value assigned to the
long-lived assets acquired, and to interest expense, net of the
related tax effect, assuming the increase in long-term debt used
to fund the acquisitions had occurred as of January 1,
2006. The pro forma net income for the year ended
December 31, 2007, includes a charge for the early
extinguishment of debt of $27.3 million before taxes and
$17.5 million after tax, or $0.19 per share (diluted). The
pro forma results do not include transaction costs incurred by
Triad prior to the date of acquisitions related to cost savings
or other synergies that are anticipated as a result of this
acquisition. These pro forma results are not necessarily
indicative of the actual results of operations.
Discontinued
Operations
Effective November 30, 2007, the Company sold Barberton
Citizens Hospital (312 licensed beds) located in Barberton, Ohio
to Summa Health System of Akron, Ohio. The proceeds from this
sale were $53.8 million.
Effective October 31, 2007, the Company sold its 60%
membership interest in Northeast Arkansas Medical Center
(NEA), a 104 bed facility in Jonesboro, Arkansas to
Baptist Memorial Health Care (Baptist),
headquartered in Memphis, Tennessee for $16.8 million. In
connection with this transaction, the Company also sold real
estate and other assets to a subsidiary of Baptist for
$26.2 million.
Effective September 1, 2007, the Company sold its
partnership interest in River West L.P., which owned and
operated River West Medical Center (an 80 bed facility located
in Plaquemine, Louisiana) to an affiliate of Shiloh Health
Services, Inc. of Lubbock, Texas. The proceeds from this sale
were $0.3 million.
22
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Effective March 18, 2006, the Company sold Highland Medical
Center, a 123-bed facility located in Lubbock, Texas, to Shiloh
Health Services, Inc. of Louisville, Kentucky. The proceeds from
this sale were $0.5 million. This hospital had previously
been classified as held for sale.
Effective January 31, 2005, the Companys lease of
Scott County Hospital, a 99 bed facility located in Oneida,
Tennessee, expired pursuant to its terms.
Effective March 31, 2005, the Company sold The Kings
Daughters Hospital, a 137 bed facility located in Greenville,
Mississippi, to Delta Regional Medical Center, also located in
Greenville, Mississippi. In a separate transaction, also
effective March 31, 2005, the Company sold Troy Regional
Medical Center, a 97 bed facility located in Troy, Alabama,
Lakeview Community Hospital, a 74 bed facility located in
Eufaula, Alabama and Northeast Medical Center, a 75 bed facility
located in Bonham, Texas to Attentus Healthcare Company of
Brentwood, Tennessee. The aggregate sales price for these four
hospitals was approximately $52.0 million and was received
in cash.
As of December 31, 2007, the Company had classified as held
for sale 12 hospitals with an aggregate total of 1,690 licensed
beds.
In connection with managements decision to sell the
previously mentioned facilities and in accordance with
SFAS No. 144, the Company has classified the results
of operations of the above mentioned hospitals as discontinued
operations in the accompanying consolidated statements of income.
Net operating revenues and loss reported for the fifteen
hospitals in discontinued operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Net operating revenues
|
|
$
|
417,677
|
|
|
$
|
189,734
|
|
|
$
|
212,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of hospitals sold or held for sale before
income taxes
|
|
|
(14,735
|
)
|
|
|
(10,694
|
)
|
|
|
(13,395
|
)
|
Loss on sale of hospitals and partnership interests
|
|
|
(3,954
|
)
|
|
|
(3,938
|
)
|
|
|
(6,295
|
)
|
Impairment of long-lived assets of hospital held for sale
|
|
|
(19,044
|
)
|
|
|
|
|
|
|
(6,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, before taxes
|
|
|
(37,733
|
)
|
|
|
(14,632
|
)
|
|
|
(26,408
|
)
|
Income tax benefit
|
|
|
8,125
|
|
|
|
5,200
|
|
|
|
5,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
$
|
(29,608
|
)
|
|
$
|
(9,432
|
)
|
|
$
|
(20,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the computation of the loss from discontinued
operations, before taxes for the year ended December 31,
2007, is a write-off of $4.0 million of tangible assets and
$0.1 million of goodwill for the partnership and membership
interests sold and the two hospitals sold and an estimated
impairment of $19.0 million on long-lived assets at the
hospitals held for sale (see Note 4 Goodwill and Other
Intangible Assets).
The computation of loss from discontinued operations, before
taxes, for the year ended December 31, 2006, includes the
net write-off of $4.4 million of tangible assets at the one
hospital sold during the year ended December 31, 2006.
Interest expense was allocated to discontinued operations based
on estimated sales proceeds available for debt repayment.
The computation of loss from discontinued operations, before
taxes, for the year ended December 31, 2005, includes the
net write-off of $51.5 million of tangible assets and
$17.1 million of goodwill of the four hospitals sold and
one hospital designated as held for sale in the second quarter
of 2005.
23
The assets and liabilities of the hospitals held for sale as of
December 31, 2007 are included in the accompanying
consolidated balance sheet as follows (in thousands): current
assets of $118,893, included in other current assets; net
property and equipment of $331,139 and other long-term assets of
$31,407, included in other assets; and current liabilities of
$67,606, included in other accrued liabilities. The assets and
liabilities of hospitals classified as held for sale at
December 31, 2007 have not been reclassified as of
December 31, 2006 in the accompanying consolidated balance
sheet.
|
|
4.
|
Goodwill
and Other Intangible Assets
|
The changes in the carrying amount of goodwill are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Balance, beginning of year
|
|
$
|
1,336,525
|
|
|
$
|
1,259,816
|
|
Goodwill acquired as part of acquisitions during the year
|
|
|
2,912,392
|
|
|
|
67,550
|
|
Consideration adjustments and finalization of purchase price
allocations for prior years acquisitions
|
|
|
22,053
|
|
|
|
9,159
|
|
Goodwill related to hospital operations segment written off as
part of disposals
|
|
|
(1,913
|
)
|
|
|
|
|
Goodwill related to hospital operations segment assigned to
disposal group classified as held for sale
|
|
|
(21,343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
4,247,714
|
|
|
$
|
1,336,525
|
|
|
|
|
|
|
|
|
|
|
SFAS No. 142 requires that goodwill be allocated to
each identified reporting unit, which is defined as an operating
segment or one level below the operating segment (referred to as
a component of the entity). As a result of the change in the
Companys operating segments as discussed in Note 1,
management has re-evaluated the determination of our reporting
units identified for allocation of goodwill in accordance with
SFAS No. 142 and determined that the operating
segments meet the criteria to be classified as reporting units.
At September 30, 2007, goodwill, except for the amount
related to the former Triad hospitals, was reallocated among the
hospital operations and home health agencies operations
reporting units. At December 31, 2007, the hospital
operations reporting unit had $1.309 billion and the home
health agencies reporting unit had $32.2 million of
goodwill. No goodwill has been allocated to the hospital
management services segment as of December 31, 2007 because
that business relates entirely to the Triad acquisition.
Goodwill related to the former Triad hospitals of
$2.907 billion has not been allocated to the reporting unit
level as of December 31, 2007 because the final purchase
price allocation has not been completed (see Note 3).
The Company performed its annual goodwill evaluation, as
required by SFAS No. 142 as of September 30,
2007, using the new segment and reporting units. No impairment
was indicated by this evaluation. The Company will continue to
perform its goodwill evaluation analysis as of
September 30th.
Approximately $180.9 million of intangible assets were
acquired during the year ended December 31, 2007. The gross
carrying amount of the Companys other intangible assets
was $194.6 million and $13.7 million as of
December 31, 2007 and 2006, respectively, and the net
carrying amount was $181.0 million and $7.4 million as
of December 31, 2007 and 2006, respectively. Substantially
all of the other intangible assets are finite lived and subject
to amortization. Other intangible assets are included in other
assets on the Companys consolidated balance sheets.
The weighted average amortization period for the intangible
assets subject to amortization is approximately 8 years.
There are no expected residual values related to these
intangible assets. Amortization expense for these intangible
assets was $2.7 million, $1.9 million and
$1.3 million during the years ended December 31, 2007,
2006 and 2005, respectively. Amortization expense on intangible
assets is estimated to be $14.8 million
24
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
in 2008, $13.9 million in 2009, $13.3 million in 2010,
$11.9 million in 2011, $8.4 million in 2012 and
$0.3 million thereafter.
The provision for income taxes for income from continuing
operations consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
27,416
|
|
|
$
|
120,209
|
|
|
$
|
101,371
|
|
State
|
|
|
11,411
|
|
|
|
13,555
|
|
|
|
12,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,827
|
|
|
|
133,764
|
|
|
|
114,117
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
6,944
|
|
|
|
(21,793
|
)
|
|
|
3,987
|
|
State
|
|
|
(2,768
|
)
|
|
|
(1,819
|
)
|
|
|
1,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,176
|
|
|
|
(23,612
|
)
|
|
|
5,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for income taxes for income from continuing
operations
|
|
$
|
43,003
|
|
|
$
|
110,152
|
|
|
$
|
119,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the differences between the
statutory federal income tax rate and the effective tax rate
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Provision for income taxes at statutory federal rate
|
|
$
|
36,015
|
|
|
|
35.0
|
%
|
|
$
|
100,746
|
|
|
|
35.0
|
%
|
|
$
|
107,861
|
|
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
|
|
5,618
|
|
|
|
5.5
|
|
|
|
7,628
|
|
|
|
2.7
|
|
|
|
9,390
|
|
|
|
3.0
|
|
Change in valuation allowance
|
|
|
3,825
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal and state tax credits
|
|
|
(2,625
|
)
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
170
|
|
|
|
0.2
|
|
|
|
1,778
|
|
|
|
0.6
|
|
|
|
2,553
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes and effective tax rate for income
from continuing operations
|
|
$
|
43,003
|
|
|
|
41.8
|
%
|
|
$
|
110,152
|
|
|
|
38.3
|
%
|
|
$
|
119,804
|
|
|
|
38.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred income taxes are based on the estimated future tax
effects of differences between the financial statement and tax
bases of assets and liabilities under the provisions of the
enacted tax laws. Deferred income taxes as of December 31,
consist of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Net operating loss and credit carryforwards
|
|
$
|
75,879
|
|
|
$
|
|
|
|
$
|
26,709
|
|
|
$
|
|
|
Property and equipment
|
|
|
|
|
|
|
464,753
|
|
|
|
|
|
|
|
136,249
|
|
Self-insurance liabilities
|
|
|
100,642
|
|
|
|
|
|
|
|
35,607
|
|
|
|
|
|
Intangibles
|
|
|
|
|
|
|
139,757
|
|
|
|
|
|
|
|
101,569
|
|
Other liabilities
|
|
|
|
|
|
|
19,076
|
|
|
|
|
|
|
|
2,879
|
|
Long-term debt and interest
|
|
|
|
|
|
|
42,447
|
|
|
|
989
|
|
|
|
|
|
Accounts receivable
|
|
|
104,727
|
|
|
|
|
|
|
|
33,535
|
|
|
|
|
|
Accrued expenses
|
|
|
21,928
|
|
|
|
|
|
|
|
20,362
|
|
|
|
|
|
Other comprehensive income
|
|
|
58,933
|
|
|
|
|
|
|
|
|
|
|
|
1,952
|
|
Stock-Based compensation
|
|
|
54,464
|
|
|
|
|
|
|
|
6,353
|
|
|
|
|
|
Other
|
|
|
23,812
|
|
|
|
|
|
|
|
12,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
440,385
|
|
|
|
666,033
|
|
|
|
135,633
|
|
|
|
242,649
|
|
Valuation allowance
|
|
|
(68,558
|
)
|
|
|
|
|
|
|
(21,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income taxes
|
|
$
|
371,827
|
|
|
$
|
666,033
|
|
|
$
|
114,426
|
|
|
$
|
242,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management believes that the net deferred tax assets will
ultimately be realized, except as noted below. Managements
conclusion is based on its estimate of future taxable income and
the expected timing of temporary difference reversals. The
Company has state net operating loss carry forwards of
approximately $1.223 billion, which expire from 2008 to
2027. With respect to the deferred tax liability pertaining to
intangibles, as included above, goodwill purchased in connection
with certain of the Companys business acquisitions is
amortizable for income tax reporting purposes. However, for
financial reporting purposes, there is no corresponding
amortization allowed with respect to such purchased goodwill.
The valuation allowance increased by $47.4 million and
$0.1 million during the years ended December 31, 2007
and 2006, respectively. In addition to amounts previously
discussed, the change in valuation allowance relates to a
redetermination of the amount of, and realizability of, net
operating losses in certain state and foreign income tax
jurisdictions. In addition, as a result of the additional
interest expense to be incurred resulting from the Triad
acquisition, the Company determined that certain of its state
net operating losses will expire before being utilized resulting
in the recording of a valuation allowance of approximately
$16.4 million. The results of this change in the valuation
allowance impacted goodwill from the acquisition.
The Company adopted the provisions of FIN 48, on
January 1, 2007. The total amount of unrecognized benefit
that would affect the effective tax rate, if recognized, is
approximately $5.7 million as of December 31, 2007. It
is the Companys policy to recognize interest and penalties
accrued related to unrecognized benefits in its statement of
operations as income tax expense. During the year ended
December 31, 2007, the Company recorded approximately
$2.4 million in liabilities and $0.6 million in
interest and penalties related to prior state income tax returns
through its income tax provision from continuing operations and
which are included in its FIN 48 liability at
December 31, 2007. A total of approximately
$1.8 million of interest and penalties is included in the
amount of FIN 48 liability at December 31, 2007.
During the year ended December 31, 2007, the Company
released $5.2 million plus accrued interest of
$0.8 million of its FIN 48 liability, as a result of
the expiration of the statute of limitations pertaining to tax
positions taken in prior years relative to legal settlements and
$1.5 million relative to state tax positions. During the
year ending December 31, 2007, the
26
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Companys FIN 48 liability decreased approximately
$3.5 million due to an income tax examination settlement of
the federal tax returns of the former Triad hospitals for the
short taxable years ended April 27, 2001, June 30,
2001 and December 31, 2001, and the taxable years ended
December 31, 2002 and 2003. The financial statement impact
of this settlement impacted goodwill.
The Companys unrecognized tax benefits consist primarily
of state exposure items. The Company believes that it is
reasonably possible that approximately $1.1 million of its
current unrecognized tax benefit may be recognized within the
next twelve months as a result of a lapse of the statute of
limitations and settlements with taxing authorities.
The following is a tabular reconciliation of the total amount of
unrecognized tax benefit for the year ended December 31,
2007 (in thousands):
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2007
|
|
|
Unrecognized Tax Benefit at January 1, 2007
|
|
$
|
10,510
|
|
Gross increases purchase business combination
|
|
|
10,160
|
|
Gross increases tax positions in current period
|
|
|
1,930
|
|
Gross increases tax positions in prior period
|
|
|
1,820
|
|
Lapse of statute of limitations
|
|
|
(6,700
|
)
|
Settlements
|
|
|
(2,840
|
)
|
|
|
|
|
|
Unrecognized Tax Benefit at December 31, 2007
|
|
$
|
14,880
|
|
|
|
|
|
|
The Company or one of its subsidiaries files income tax returns
in the U.S. federal jurisdiction and various state
jurisdictions. With few exceptions, the Company is no longer
subject to U.S. federal or state income tax examinations
for years prior to 2003. During 2006, the Company agreed to a
settlement at the Internal Revenue Service (the IRS)
Appeals Office with respect to the 2003 tax year. The Company
has since received a closing letter with respect to the
examination for that tax year. The settlement was not material
to the Companys results of operations or financial
position.
The IRS has concluded an examination of the federal income tax
returns of Triad for the short taxable years ended
April 27, 2001, June 30, 2001 and December 31,
2001, and the taxable years ended December 31, 2002 and
2003. On May 10, 2006, the IRS issued an examination report
with proposed adjustments. Triad filed a protest on June 9,
2006 and the matter was referred to the IRS Appeals Office.
Representatives of the former Triad hospitals met with the IRS
Appeals Office in April 2007 and reached a tentative settlement.
Triad has since received a closing letter with respect to the
examination for those tax years. The settlement was not material
to the Companys results of operations or financial
position.
The Company paid income taxes, net of refunds received, of
$85.2 million, $128.1 million and $68.1 million
during 2007, 2006, and 2005, respectively.
27
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long-term debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Credit Facilities:
|
|
|
|
|
|
|
|
|
Term loans
|
|
$
|
5,965,000
|
|
|
$
|
1,572,000
|
|
Revolving credit loans
|
|
|
|
|
|
|
|
|
Tax-exempt bonds
|
|
|
8,000
|
|
|
|
8,000
|
|
Senior subordinated notes
|
|
|
3,021,331
|
|
|
|
300,000
|
|
Capital lease obligations (see Note 8)
|
|
|
35,136
|
|
|
|
44,670
|
|
Other
|
|
|
68,610
|
|
|
|
16,507
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
9,098,077
|
|
|
|
1,941,177
|
|
Less current maturities
|
|
|
(20,710
|
)
|
|
|
(35,396
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
9,077,367
|
|
|
$
|
1,905,781
|
|
|
|
|
|
|
|
|
|
|
Terminated
Credit Facility and Notes
On August 19, 2004, the Company entered into a
$1.625 billion senior secured credit facility with a
consortium of lenders which was subsequently amended on
December 16, 2004, July 8, 2005 and December 13,
2006 (the Terminated Credit Facility). The purpose
of the Terminated Credit Facility was to refinance and replace
the Companys previous credit agreement, repay specified
other indebtedness, and fund general corporate purposes,
including amending the credit facility to permit declaration and
payment of cash dividends, to repurchase shares or make other
distributions, subject to certain restrictions. The Terminated
Credit Facility consisted of a $1.2 billion term loan that
was due to mature in 2011 and a $425 million revolving
credit facility that was due to mature in 2009. The First
Incremental Facility Amendment, dated as of December 13,
2006, increased the Companys term loans by
$400 million (the Incremental Term Loan
Facility) and also gave the Company the ability to add up
to $400 million of additional term loans. The full amount
of the Incremental Term Loan Facility was funded on
December 13, 2006, and the proceeds were used to repay the
full outstanding amount (approximately $326 million) of the
revolving credit facility under the credit agreement and the
balance was available to be used for general corporate purposes.
The Company was able to elect from time to time an interest rate
per annum for the borrowings under the term loan, including the
incremental term loan, and revolving credit facility equal to
(a) an alternate base rate, which would have been equal to
the greatest of (i) the Prime Rate (as defined) in effect
and (ii) the Federal Funds Effective Rate (as defined),
plus 50 basis points, plus (1) 75 basis points
for the term loan and (2) the Applicable Margin (as
defined) for revolving credit loans or (b) the Eurodollar
Rate (as defined) plus (1) 175 basis points for the
term loan and (2) the Applicable Margin for Eurodollar
revolving credit loans. The Company also paid a commitment fee
for the daily average unused commitments under the revolving
credit facility. The commitment fee was based on a pricing grid
depending on the Applicable Margin for Eurodollar revolving
credit loans and ranged from 0.250% to 0.500%. The commitment
fee was payable quarterly in arrears and on the revolving credit
termination date with respect to the available revolving credit
commitments. In addition, the Company paid fees for each letter
of credit issued under the credit facility.
On December 16, 2004, the Company issued $300 million
61/2% senior
subordinated notes due 2012. On April 8, 2005, the Company
exchanged these notes for notes having substantially the same
terms as the outstanding notes, except the exchanged notes were
registered under the Securities Act of 1933, as amended (the
1933 Act).
28
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
New
Credit Facility and Notes
On July 25, 2007, the New Credit Facility was entered into
with a syndicate of financial institutions led by Credit Suisse,
as administrative agent and collateral agent. The New Credit
Facility consists of a $6.065 billion funded term loan
facility with a maturity of seven years, a $400 million
delayed draw term loan facility with a maturity of seven years
and a $750 million revolving credit facility with a
maturity of six years. The revolving credit facility also
includes a subfacility for letters of credit and a swingline
subfacility. As previously disclosed, in connection with the
consummation of the acquisition of Triad, the Company used a
portion of the net proceeds from its New Credit Facility and the
Notes offering to repay its outstanding debt under the
Terminated Credit Facility. The Company recorded a pre-tax
write-off of approximately $13.9 million in deferred loan
costs relative to the early extinguishment of the debt under the
Terminated Credit Facility and incurred tender and solicitation
fees of approximately $13.4 million on the early repayment
of the Companys $300 million aggregate principal
amount of
61/2% Senior
Subordinated Notes due 2012 through a cash tender offer and
consent solicitation.
The New Credit Facility requires the Company to make quarterly
amortization payments of each term loan facility equal to 0.25%
of the outstanding amount of the term loans, if any, with the
outstanding principal balance payable on July 25, 2014.
The term loan facility must be prepaid in an amount equal to
(1) 100% of the net cash proceeds of certain asset sales
and dispositions by the Company and its subsidiaries, subject to
certain exceptions and reinvestment rights, (2) 100% of the
net cash proceeds of issuances of certain debt obligations or
receivables based financing by the Company and its subsidiaries,
subject to certain exceptions, and (3) 50%, subject to
reduction to a lower percentage based on the Companys
leverage ratio (as defined in the New Credit Facility, generally
as the ratio of total debt on the date of determination to the
Companys EBITDA, as defined, for the four quarters most
recently ended prior to such date) of excess cash flow (as
defined) for any year, commencing in 2008, subject to certain
exceptions. Voluntary prepayments and commitment reductions are
permitted in whole or in part, without any premium or penalty,
subject to minimum prepayment or reduction requirements.
The obligor under the New Credit Facility is CHS/Community
Health. All of the obligations under the New Credit Facility are
unconditionally guaranteed by the Company and certain existing
and subsequently acquired or organized domestic subsidiaries.
All obligations under the New Credit Facility and the related
guarantees are secured by a perfected first priority lien or
security interest in substantially all of the assets of the
Company, CHS/Community Health and each subsidiary guarantor,
including equity interests held by the Company, CHS/Community
Health or any subsidiary guarantor, but excluding, among others,
the equity interests of non-significant subsidiaries,
syndication subsidiaries, securitization subsidiaries and joint
venture subsidiaries.
The loans under the New Credit Facility will bear interest on
the outstanding unpaid principal amount at a rate equal to an
applicable percentage plus, at the Companys option, either
(a) an Alternate Base Rate (as defined) determined by
reference to the greater of (1) the Prime Rate (as defined)
announced by Credit Suisse or (2) the Federal Funds
Effective Rate (as defined) plus one-half of 1.0%, or (b) a
reserve adjusted London interbank offered rate for dollars
(Eurodollar Rate) (as defined). The applicable percentage for
term loans is 1.25% for Alternate Base Rate loans and 2.25% for
Eurodollar rate loans. The applicable percentage for revolving
loans is initially 1.25% for Alternate Base Rate revolving loans
and 2.25% for Eurodollar revolving loans, in each case subject
to reduction based on the Companys leverage ratio. Loans
under the swingline subfacility bear interest at the rate
applicable to alternative base rate loans under the revolving
credit facility.
The Company has agreed to pay letter of credit fees equal to the
applicable percentage then in effect with respect to Eurodollar
rate loans under the revolving credit facility times the maximum
aggregate amount available to be drawn under all letters of
credit outstanding under the subfacility for letters of credit.
The
29
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
issuer of any letter of credit issued under the subfacility for
letters of credit will also receive a customary fronting fee and
other customary processing charges. The Company is also
obligated to pay commitment fees of 0.50% per annum (subject to
reduction based upon the Companys leverage ratio) on the
unused portion of the revolving credit facility. For purposes of
this calculation, swingline loans are not treated as usage of
the revolving credit facility. The Company is also obligated to
pay commitment fees of 0.50% per annum for the first six months
after the closing of the New Credit Facility, 0.75% per annum
for the next three months thereafter and 1.0% per annum
thereafter, in each case on the unused amount of the delayed
draw term loan facility. The Company paid arrangement fees on
the closing of the New Credit Facility and will pay an annual
administrative agent fee.
The New Credit Facility contains customary representations and
warranties, subject to limitations and exceptions, and customary
covenants restricting, subject to certain exceptions, the
Companys and its subsidiaries ability to, among
other things (1) declare dividends, make distributions or
redeem or repurchase capital stock, (2) prepay, redeem or
repurchase other debt, (3) incur liens or grant negative
pledges, (4) make loans and investments and enter into
acquisitions and joint ventures, (5) incur additional
indebtedness or provide certain guarantees, (6) make
capital expenditures, (7) engage in mergers, acquisitions
and asset sales, (8) conduct transactions with affiliates,
(9) alter the nature of the Companys businesses,
(10) grant certain guarantees with respect to physician
practices, (11) engage in sale and leaseback transactions
or (12) change the Companys fiscal year. The Company
is also required to comply with specified financial covenants
(consisting of a leverage ratio and an interest coverage ratio)
and various affirmative covenants.
Events of default under the New Credit Facility include, but are
not limited to, (1) the Companys failure to pay
principal, interest, fees or other amounts under the credit
agreement when due (taking into account any applicable grace
period), (2) any representation or warranty proving to have
been materially incorrect when made, (3) covenant defaults
subject, with respect to certain covenants, to a grace period,
(4) bankruptcy events, (5) a cross default to certain
other debt, (6) certain undischarged judgments (not paid
within an applicable grace period), (7) a change of
control, (8) certain ERISA-related defaults, and
(9) the invalidity or impairment of specified security
interests, guarantees or subordination provisions in favor of
the administrative agent or lenders under the New Credit
Facility.
The Notes were issued by CHS/Community Health in connection with
the Triad acquisition in the principal amount of
$3.021 billion. These Notes will mature on July 15,
2015. The Notes bear interest at the rate of 8.875% per annum,
payable semiannually in arrears on January 15 and July 15,
commencing January 15, 2008. Interest on the Notes accrue
from the date of original issuance. Interest will be calculated
on the basis of
360-day year
comprised of twelve
30-day
months.
Except as set forth below, CHS/Community Health is not entitled
to redeem the Notes prior to July 15, 2011.
On and after July 15, 2011, CHS/Community Health is
entitled, at its option, to redeem all or a portion of the Notes
upon not less than 30 nor more than 60 days notice, at the
redemption prices (expressed as a percentage of principal amount
on the redemption date), plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on
the relevant interest payment date), if redeemed during the
12-month
period commencing on July 15 of the years set forth below:
|
|
|
|
|
|
|
Redemption
|
|
Period
|
|
Price
|
|
|
2011
|
|
|
104.438
|
%
|
2012
|
|
|
102.219
|
%
|
2013 and thereafter
|
|
|
100.000
|
%
|
30
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In addition, any time prior to July 15, 2010, CHS/Community
Health is entitled, at its option, on one or more occasions to
redeem the Notes (which include additional Notes (the
Additional Notes), if any which may be issued from
time to time under the indenture under which the Notes were
issued) in an aggregate principal amount not to exceed 35% of
the aggregate principal amount of the Notes (which includes
Additional Notes, if any) originally issued at a redemption
price (expressed as a percentage of principal amount) of
108.875%, plus accrued and unpaid interest to the redemption
date, with the Net Cash Proceeds (as defined) from one or more
Public Equity Offerings (as defined) (provided that if the
Public Equity Offering is an offering by the Company, a portion
of the Net Cash Proceeds thereof equal to the amount required to
redeem any such Notes is contributed to the equity capital of
CHS/Community Health); provided, however, that:
1) at least 65% of such aggregate principal amount of Notes
originally issued remains outstanding immediately after the
occurrence of each such redemption (other than the Notes held,
directly or indirectly, by the Company or its
subsidiaries); and
2) each such redemption occurs within 90 days after
the date of the related Public Equity Offering.
CHS/Community Health is entitled, at its option, to redeem the
Notes, in whole or in part, at any time prior to July 15,
2011, upon not less than 30 or more than 60 days notice, at
a redemption price equal to 100% of the principal amount of
Notes redeemed plus the Application Premium (as defined), and
accrued and unpaid interest, if any, as of the applicable
redemption date.
Pursuant to a registration rights agreement entered into at the
time of the issuance of the Notes, CHS/Community Health
commenced an offer (the Exchange Offer) on
October 9, 2007, to exchange the Notes for new notes (the
Exchange Notes) having terms substantially identical
in all material respects to the Notes (except that the Exchange
Notes will be issued under a registration statement pursuant to
the 1933 Act.) This registration statement was declared
effective by the SEC on October 9, 2007. The Exchange Offer
expired on November 13, 2007. The Exchange Offer was
consummated on November 19, 2007.
As of December 31, 2007, the Companys availability
for additional borrowings under its New Credit Facility was
$1.050 billion (consisting of a $750 million revolving
credit facility and a $300 million delayed draw term loan
facility), of which $36 million was set aside for
outstanding letters of credit. The Company also has the ability
to add up to $300 million of borrowing capacity from
receivable transactions (including securitizations) under the
New Credit Facility which has not yet been accessed. The Company
also has the ability to amend the New Credit Facility to provide
for one or more tranches of term loans in an aggregate principal
amount of $600 million, which the Company has not yet
accessed. As of December 31, 2007, the Companys
weighted-average interest rate under the New Credit Facility was
7.78%.
The Term Loans are scheduled to be paid with principal payments
for future years as follows (in thousands):
|
|
|
|
|
|
|
Term
|
|
|
|
Loans
|
|
|
2008
|
|
$
|
|
|
2009
|
|
|
36,463
|
|
2010
|
|
|
60,650
|
|
2011
|
|
|
60,650
|
|
2012
|
|
|
60,650
|
|
Thereafter
|
|
|
5,746,587
|
|
|
|
|
|
|
Total
|
|
$
|
5,965,000
|
|
|
|
|
|
|
31
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of December 31, 2007 and 2006, the Company had letters
of credit issued, primarily in support of potential insurance
related claims and certain bonds of approximately
$36 million and $21 million, respectively.
Tax-Exempt Bonds. Tax-Exempt Bonds bore
interest at floating rates, which averaged 3.69% and 3.51%
during 2007 and 2006, respectively.
Senior Subordinated Notes. On
December 16, 2004, the Company completed a private
placement offering of $300 million aggregate principal
amount of 6.5% senior subordinated notes due 2012. The
senior subordinated notes were sold in an offering pursuant to
Rule 144A and Regulation S under the 1933 Act.
The senior subordinated notes when issued were registered under
the 1933 Act or the securities laws of any state and may
not be offered or sold in the United States absent registration
or an applicable exemption from the registration requirements
under the 1933 Act and any applicable state securities
laws. On February 24, 2005, the Company filed a
registration statement to exchange these notes for registered
notes. This exchange was completed during the first quarter of
2005.
In connection with the consummation of the acquisition of Triad,
the Company completed an early repayment of the
$300 million aggregate principal amount of
61/2% Senior
Subordinated Notes due 2012 through a cash tender offer and
consent solicitation.
As previously described, in connection with the Triad
acquisition, the Company issued $3.021 billion principal
amount of Notes. These Notes bear interest at 8.875% interest
and mature on July 15, 2015.
Other Debt. As of December 31, 2007,
other debt consisted primarily of an industrial revenue bond,
the mortgage obligation on the Companys corporate
headquarters and other obligations maturing in various
installments through 2017.
The Company is currently a party to 29 separate interest swap
agreements with an aggregate notional amount of
$4.050 billion, to limit the effect of changes in interest
rates on a portion of the Companys long-term borrowings.
On each of these swaps, the Company receives a variable rate of
interest based on the three-month London Inter-Bank Offer Rate
(LIBOR) in exchange for the payment of a fixed rate
of interest. The Company currently pays, on a quarterly basis, a
margin above LIBOR of 225 basis points for revolver loans
and term loans under the senior secured credit facility. See
footnote 7 for additional information regarding these swaps.
As of December 31, 2007, the scheduled maturities of
long-term debt outstanding, including capital leases for each of
the next five years and thereafter are as follows (in thousands):
|
|
|
|
|
2008
|
|
$
|
20,710
|
|
2009
|
|
|
53,887
|
|
2010
|
|
|
79,331
|
|
2011
|
|
|
70,316
|
|
2012
|
|
|
66,517
|
|
Thereafter
|
|
|
8,807,316
|
|
|
|
|
|
|
Total
|
|
$
|
9,098,077
|
|
|
|
|
|
|
The Company paid interest of $218 million, $96 million
and $90 million on borrowings during the years ended
December 31, 2007, 2006 and 2005, respectively.
32
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
7.
|
Fair
Values of Financial Instruments
|
The fair value of financial instruments has been estimated by
the Company using available market information as of
December 31, 2007 and 2006, and valuation methodologies
considered appropriate. The estimates presented are not
necessarily indicative of amounts the Company could realize in a
current market exchange (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Carrying
|
|
|
Estimated Fair
|
|
|
Carrying
|
|
|
Estimated Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
132,874
|
|
|
$
|
132,874
|
|
|
$
|
40,566
|
|
|
$
|
40,566
|
|
Available-for-sale securities
|
|
|
8,352
|
|
|
|
8,352
|
|
|
|
7,620
|
|
|
|
7,620
|
|
Trading securities
|
|
|
38,075
|
|
|
|
38,075
|
|
|
|
17,714
|
|
|
|
17,714
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facilities
|
|
|
5,965,000
|
|
|
|
5,733,856
|
|
|
|
1,572,000
|
|
|
|
1,573,540
|
|
Tax-exempt bonds
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
8,000
|
|
Senior subordinated notes
|
|
|
3,021,331
|
|
|
|
3,074,204
|
|
|
|
300,000
|
|
|
|
295,500
|
|
Other debt
|
|
|
68,610
|
|
|
|
68,610
|
|
|
|
4,344
|
|
|
|
4,344
|
|
Cash and cash equivalents. The carrying amount
approximates fair value due to the short term maturity of these
instruments (less than three months).
Available-for-sale securities. Estimated fair
value is based on closing price as quoted in public markets.
Trading Securities. Estimated fair value is
based on closing price as quoted in public markets.
Credit facilities. Estimated fair value is
based on information from the Companys bankers regarding
relevant pricing for trading activity among the Companys
lending institutions.
Tax Exempt Bonds. The carrying amount
approximates fair value as a result of the weekly interest rate
reset feature of these publicly-traded instruments.
Senior Subordinated Notes. Estimated fair
value is based on the average bid and ask price as quoted by the
bank who served as underwriters in the sale of these notes.
Interest Rate Swaps. The fair value of
interest rate swap agreements is the amount at which they could
be settled, based on estimates obtained from the counterparty.
The Company has designated the interest rate swaps as cash flow
hedge instruments whose recorded value included in other
long-term liabilities in the consolidated balance sheet
approximates fair market value.
The Company assesses the effectiveness of its hedge instruments
on a quarterly basis. For the years ended December 31, 2007
and 2006, the Company completed an assessment of the cash flow
hedge instruments and determined the hedges to be highly
effective. The Company has also determined that the ineffective
portion of the hedges do not have a material effect on the
Companys consolidated financial position, operations or
cash flows. The counterparty to the interest rate swap
agreements exposes the Company to credit risk in the event of
non-performance. However, the Company does not anticipate
non-performance by the counterparty. The Company does not hold
or issue derivative financial instruments for trading purposes.
Other debt. The carrying amount of all other
debt approximates fair value due to the nature of these
obligations.
33
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Interest rate swaps consisted of the following at
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
Fixed
|
|
|
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Interest
|
|
|
Termination
|
|
|
Value
|
|
Swap #
|
|
(In 000s)
|
|
|
Rate
|
|
|
Date
|
|
|
(000s)
|
|
|
1
|
|
|
100,000
|
|
|
|
4.0610
|
%
|
|
|
May 30, 2008
|
|
|
$
|
234
|
|
2
|
|
|
100,000
|
|
|
|
2.4000
|
%
|
|
|
June 13, 2008
|
|
|
|
989
|
|
3
|
|
|
100,000
|
|
|
|
3.5860
|
%
|
|
|
August 29, 2008
|
|
|
|
493
|
|
4
|
|
|
100,000
|
|
|
|
3.9350
|
%
|
|
|
June 6, 2009
|
|
|
|
(119
|
)
|
5
|
|
|
100,000
|
|
|
|
4.3375
|
%
|
|
|
November 30, 2009
|
|
|
|
(1,052
|
)
|
6
|
|
|
100,000
|
|
|
|
4.9360
|
%
|
|
|
October 4, 2010
|
|
|
|
(2,948
|
)
|
7
|
|
|
100,000
|
|
|
|
4.7090
|
%
|
|
|
January 24, 2011
|
|
|
|
(2,479
|
)
|
8
|
|
|
300,000
|
|
|
|
5.1140
|
%
|
|
|
August 8, 2011
|
|
|
|
(12,012
|
)
|
9
|
|
|
100,000
|
|
|
|
4.7185
|
%
|
|
|
August 19, 2011
|
|
|
|
(2,668
|
)
|
10
|
|
|
100,000
|
|
|
|
4.7040
|
%
|
|
|
August 19, 2011
|
|
|
|
(2,353
|
)
|
11
|
|
|
100,000
|
|
|
|
4.6250
|
%
|
|
|
August 19, 2011
|
|
|
|
(2,321
|
)
|
12
|
|
|
200,000
|
|
|
|
4.9300
|
%
|
|
|
August 30, 2011
|
|
|
|
(6,755
|
)
|
13
|
|
|
200,000
|
|
|
|
4.4815
|
%
|
|
|
October 26, 2011
|
|
|
|
(3,706
|
)
|
14
|
|
|
200,000
|
|
|
|
4.0840
|
%
|
|
|
December 3, 2011
|
|
|
|
(907
|
)
|
15
|
|
|
250,000
|
|
|
|
5.0185
|
%
|
|
|
May 30, 2012
|
|
|
|
(9,939
|
)
|
16
|
|
|
150,000
|
|
|
|
5.0250
|
%
|
|
|
May 30, 2012
|
|
|
|
(6,020
|
)
|
17
|
|
|
200,000
|
|
|
|
4.6845
|
%
|
|
|
September 11, 2012
|
|
|
|
(5,255
|
)
|
18
|
|
|
125,000
|
|
|
|
4.3745
|
%
|
|
|
November 23, 2012
|
|
|
|
(1,514
|
)
|
19
|
|
|
75,000
|
|
|
|
4.3800
|
%
|
|
|
November 23, 2012
|
|
|
|
(713
|
)
|
20
|
|
|
150,000
|
|
|
|
5.0200
|
%
|
|
|
November 30, 2012
|
|
|
|
(6,172
|
)
|
21
|
|
|
100,000
|
|
|
|
5.0230
|
%
|
|
|
May 30, 2013
|
(1)
|
|
|
(4,043
|
)
|
22
|
|
|
300,000
|
|
|
|
5.2420
|
%
|
|
|
August 6, 2013
|
|
|
|
(15,970
|
)
|
23
|
|
|
100,000
|
|
|
|
5.0380
|
%
|
|
|
August 30, 2013
|
(2)
|
|
|
(4,123
|
)
|
24
|
|
|
100,000
|
|
|
|
5.0500
|
%
|
|
|
November 30, 2013
|
(3)
|
|
|
(3,871
|
)
|
25
|
|
|
100,000
|
|
|
|
5.2310
|
%
|
|
|
July 25, 2014
|
|
|
|
(5,423
|
)
|
26
|
|
|
100,000
|
|
|
|
5.2310
|
%
|
|
|
July 25, 2014
|
|
|
|
(4,440
|
)
|
27
|
|
|
200,000
|
|
|
|
5.1600
|
%
|
|
|
July 25, 2014
|
|
|
|
(9,965
|
)
|
28
|
|
|
75,000
|
|
|
|
5.0405
|
%
|
|
|
July 25, 2014
|
|
|
|
(3,213
|
)
|
29
|
|
|
125,000
|
|
|
|
5.0215
|
%
|
|
|
July 25, 2014
|
|
|
|
(5,217
|
)
|
|
|
|
(1) |
|
This swap agreement becomes effective May 30, 2008,
concurrent with the termination of agreement #1 listed above. |
|
(2) |
|
This swap agreement becomes effective June 13, 2008,
concurrent with the termination of agreement #2 listed above. |
|
(3) |
|
This swap agreement becomes effective September 2, 2008,
after the termination of agreement #3 listed above. |
Assuming no change in December 31, 2007 interest rates,
approximately $2.8 million will be recognized in earnings
through interest expense during the year ending
December 31, 2008 pursuant to the interest rate swap
agreements. If interest rate swaps do not remain highly
effective as a cash flow hedge, the derivatives gains or
losses reported through other comprehensive income will be
reclassified into earnings.
34
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company leases hospitals, medical office buildings, and
certain equipment under capital and operating lease agreements.
During 2007, the Company entered into $10.8 million of
capital leases and assumed $10.0 million of capital leases
in the acquisition of the former Triad hospitals. All lease
agreements generally require the Company to pay maintenance,
repairs, property taxes and insurance costs. Commitments
relating to noncancellable operating and capital leases for each
of the next five years and thereafter are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Operating(1)
|
|
|
Capital
|
|
|
2008
|
|
$
|
146,084
|
|
|
$
|
9,290
|
|
2009
|
|
|
124,159
|
|
|
|
5,854
|
|
2010
|
|
|
102,242
|
|
|
|
4,586
|
|
2011
|
|
|
81,083
|
|
|
|
3,475
|
|
2012
|
|
|
65,190
|
|
|
|
2,755
|
|
Thereafter
|
|
|
249,945
|
|
|
|
21,049
|
|
|
|
|
|
|
|
|
|
|
Total minimum future payments
|
|
$
|
768,703
|
|
|
$
|
47,009
|
|
|
|
|
|
|
|
|
|
|
Less imputed interest
|
|
|
|
|
|
|
(11,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,136
|
|
Less current portion
|
|
|
|
|
|
|
(5,967
|
)
|
|
|
|
|
|
|
|
|
|
Long-term capital lease obligations
|
|
|
|
|
|
$
|
29,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Minimum lease payments have not been reduced by minimum sublease
rentals due in the future of $48.5 million. |
Assets capitalized under capital leases as reflected in the
accompanying consolidated balance sheets were $23.5 million
of land and improvements, $140.1 million of buildings and
improvements, and $61.8 million of equipment and fixtures
as of December 31, 2007 and $19.2 million of land and
improvements, $167.8 million of buildings and improvements
and $52.4 million of equipment and fixtures as of
December 31, 2006. The accumulated depreciation related to
assets under capital leases was $79.9 million and
$63.7 million as of December 31, 2007 and 2006,
respectively. Depreciation of assets under capital leases is
included in depreciation and amortization and amortization of
debt discounts on capital lease obligations is included in
interest expense in the consolidated statements of income.
|
|
9.
|
Employee
Benefit Plans
|
The Company maintains various benefit plans, including defined
contribution plans, defined benefit plans and deferred
compensation plans. The Companys defined contribution
plans consist of one plan that covers substantially all
corporate office employees and employees at the Companys
hospitals and clinics owned prior to the acquisition of Triad.
The other defined contribution plan covers substantially all
employees at the former Triad hospitals, clinics and QHR. These
plans are qualified under Section 401(k) of the Internal
Revenue Code. Participants may contribute a portion of their
compensation not exceeding a limit set annually by the Internal
Revenue Service. These plans include a provision for the Company
to match a portion of employee contributions. In addition, the
plan covering the former Triad hospitals provides for a
supplementary contribution, determined primarily as a percentage
of participants annual wages. The Company is required to
maintain the former Triad plan, including this supplementary
contribution benefit, through December 31, 2008. Total
expense to the Company under the 401(k) plans was
$39.8 million, $10.7 million and $8.8 million for
the years ended December 31, 2007, 2006 and 2005,
respectively.
35
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In 2007, the Company merged its three defined benefit,
non-contributory pension plans, which covered certain employees
at three of its hospitals, into one plan (Pension
plan). The Pension plan provides benefits to covered
individuals satisfying certain age and service requirements.
Employer contributions to the Pension plan are in accordance
with the minimum funding requirements of the Employee Retirement
Income Security Act of 1974, as amended. The Company expects to
contribute $3.7 million to the Pension plan in fiscal 2008.
The Company also provides an unfunded supplemental executive
retirement plan (SERP) for certain members of its
executive management. The Company uses a December 31 measurement
date for the benefit obligations and a January 1 measurement
date for its net periodic costs for both the Pension plan and
SERP. Variances from actuarially assumed rates will result in
increases or decreases in benefit obligations, net periodic cost
and funding requirements in future periods.
The Companys unfunded deferred compensation plans allow
participants to defer receipt of a portion of their
compensation. The liability under the deferred compensation
plans was $59.4 million as of December 31, 2007 and
$17.7 million as of December 31, 2006. The Company had
trading securities either restricted or generally designated to
pay benefits of the deferred compensation plans in the amounts
of $38.1 million and $17.7 million as of
December 31, 2007 and 2006, respectively, and
available-for-sale securities either restricted or generally
designated to pay benefits of the SERP in the amounts of
$8.4 million and $7.6 million as of December 31,
2007 and 2006, respectively.
A summary of the benefit obligations and funded status for the
Companys pension and SERP plans follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
SERP
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
26,220
|
|
|
$
|
27,467
|
|
|
$
|
23,293
|
|
|
$
|
22,280
|
|
Service cost
|
|
|
3,772
|
|
|
|
3,757
|
|
|
|
2,810
|
|
|
|
3,023
|
|
Interest cost
|
|
|
1,587
|
|
|
|
1,601
|
|
|
|
1,340
|
|
|
|
1,225
|
|
Plan amendment
|
|
|
|
|
|
|
(5,769
|
)
|
|
|
|
|
|
|
|
|
Actuarial (gain)/loss
|
|
|
(2,812
|
)
|
|
|
(792
|
)
|
|
|
1,155
|
|
|
|
(3,235
|
)
|
Benefits paid
|
|
|
(112
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
|
28,655
|
|
|
|
26,220
|
|
|
|
28,598
|
|
|
|
23,293
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets, beginning of year
|
|
|
13,670
|
|
|
|
12,452
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
834
|
|
|
|
1,262
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
1,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(112
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets, end of year
|
|
|
15,479
|
|
|
|
13,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded status
|
|
$
|
(13,176
|
)
|
|
$
|
(12,550
|
)
|
|
$
|
(28,598
|
)
|
|
$
|
(23,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the amounts recognized in the accompanying
consolidated balance sheets follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
SERP
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Noncurrent Asset
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Current Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liability
|
|
|
(13,176
|
)
|
|
|
(12,550
|
)
|
|
|
(28,598
|
)
|
|
|
(23,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized in the consolidated balance sheets
|
|
$
|
(13,176
|
)
|
|
$
|
(12,550
|
)
|
|
$
|
(28,598
|
)
|
|
$
|
(23,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the plans benefit obligation in excess of the
fair value of plan assets as of the end of the year follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
SERP
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Projected benefit obligation
|
|
$
|
28,655
|
|
|
$
|
26,220
|
|
|
$
|
28,598
|
|
|
$
|
23,293
|
|
Accumulated benefit obligation
|
|
|
20,587
|
|
|
|
17,127
|
|
|
|
18,546
|
|
|
|
18,214
|
|
Fair value of plan assets
|
|
|
15,479
|
|
|
|
13,670
|
|
|
|
|
|
|
|
|
|
A summary of the weighted-average assumptions used by the
Company to determine benefit obligations as of December 31
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
SERP
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Discount Rate
|
|
|
6.55%
|
|
|
|
5.73% - 5.95%
|
|
|
|
6.00%
|
|
|
|
5.75%
|
|
Annual Salary Increases
|
|
|
4.00%
|
|
|
|
4.00% - 5.00%
|
|
|
|
5.00%
|
|
|
|
5.00%
|
|
A summary of the amounts recognized in Accumulated Other
Comprehensive Income (AOCI) due to the adoption of
SFAS No. 158 Employers Accounting for
Defined Benefit Pension and Other Postretirement
Plans an amendment of SFAS No. 87, 88, 106
and 132(R) (SFAS No. 158) as of
December 31, 2006 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
SERP
|
|
|
|
2006
|
|
|
2006
|
|
|
Amount recognized in AOCI prior to SFAS 158
|
|
$
|
|
|
|
$
|
|
|
Amount recognized in AOCI due to adoption of SFAS 158:
|
|
|
|
|
|
|
|
|
Prior service cost (credit)
|
|
|
3,583
|
|
|
|
6,586
|
|
Net actuarial (gain) loss
|
|
|
141
|
|
|
|
2,937
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized in AOCI
|
|
$
|
3,724
|
|
|
$
|
9,523
|
|
|
|
|
|
|
|
|
|
|
37
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of net periodic cost and other amounts recognized in
Other Comprehensive Income follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
SERP
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Service cost
|
|
$
|
3,772
|
|
|
$
|
3,757
|
|
|
$
|
3,043
|
|
|
$
|
2,810
|
|
|
$
|
3,023
|
|
|
$
|
2,113
|
|
Interest cost
|
|
|
1,586
|
|
|
|
1,601
|
|
|
|
1,364
|
|
|
|
1,339
|
|
|
|
1,225
|
|
|
|
846
|
|
Expected return on plan assets
|
|
|
(1,179
|
)
|
|
|
(1,054
|
)
|
|
|
(706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized prior service cost
|
|
|
689
|
|
|
|
1,336
|
|
|
|
1,336
|
|
|
|
884
|
|
|
|
884
|
|
|
|
884
|
|
Amortization of net (gain)/loss
|
|
|
(13
|
)
|
|
|
|
|
|
|
(17
|
)
|
|
|
60
|
|
|
|
407
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
|
4,855
|
|
|
|
5,640
|
|
|
|
5,020
|
|
|
|
5,093
|
|
|
|
5,539
|
|
|
|
3,898
|
|
Change in OCI
|
|
|
(3,142
|
)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
212
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in Net periodic cost and OCI
|
|
$
|
1,713
|
|
|
$
|
5,640
|
|
|
$
|
5,020
|
|
|
$
|
5,305
|
|
|
$
|
5,539
|
|
|
$
|
3,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the expected amortization amounts to be included in
net periodic cost for 2008 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
Plans
|
|
SERP
|
|
Prior service cost
|
|
$
|
689
|
|
|
$
|
884
|
|
Actuarial (gain)/loss
|
|
|
|
|
|
|
122
|
|
A summary of the weighted-average assumptions used by the
Company to determine net periodic cost follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
SERP
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Discount rate
|
|
|
5.94
|
%
|
|
|
5.40% - 5.80%
|
|
|
|
6.00
|
%
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
4.00% - 5.00%
|
|
|
|
4.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Expected long term rate of return on assets
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
The Companys weighted-average asset allocations by asset
category for its pension plans as of the end of the year follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
SERP
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Equity securities
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Debt securities
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The Companys pension plan assets are invested in mutual
funds with an underlying investment allocation of 60% equity
securities and 40% debt securities. The expected long-term rate
of return for the Companys pension plan assets is based on
current expected long-term inflation and historical rates of
return on equities and fixed income securities, taking into
account the investment policy under the plan. The expected
long-term rate of return is weighted based on the target
allocation for each asset category. Equity securities are
expected to return between 8% and 12% and debt securities are
expected to return between 4% and 7%. The Company expects its
pension plan asset managers will provide a premium of
approximately 0.5% to 1.5% per annum to the respective market
benchmark indices.
38
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys investment policy related to its pension
plans is to provide for growth of capital with a moderate level
of volatility by investing in accordance with the target asset
allocations stated above. The Company reviews its investment
policy, including its target asset allocations, on a semi-annual
basis to determine whether any changes in market conditions or
amendments to its pension plans requires a revision to its
investment policy.
The estimated future benefit payments reflecting future service
as of the end of 2007 for the Companys pension and SERP
plans follows (in thousands):
|
|
|
|
|
|
|
|
|
Years Ending
|
|
Pension Plans
|
|
|
SERP
|
|
|
2008
|
|
$
|
271
|
|
|
$
|
|
|
2009
|
|
|
372
|
|
|
|
91
|
|
2010
|
|
|
438
|
|
|
|
91
|
|
2011
|
|
|
508
|
|
|
|
1,539
|
|
2012
|
|
|
651
|
|
|
|
1,591
|
|
2013 - 2016
|
|
|
4,611
|
|
|
|
14,019
|
|
Authorized capital shares of the Company include
400,000,000 shares of capital stock consisting of
300,000,000 shares of common stock and
100,000,000 shares of Preferred Stock. Each of the
aforementioned classes of capital stock has a par value of $.01
per share. Shares of Preferred Stock, none of which are
outstanding as of December 31, 2007 may be issued in
one or more series having such rights, preferences and other
provisions as determined by the Board of Directors without
approval by the holders of common stock.
On January 14, 2006, the Company commenced an open market
repurchase program for up to 5,000,000 shares of the
Companys common stock, not to exceed $200 million in
repurchases. Under this program, the Company repurchased the
entire 5,000,000 shares at a weighted average price of
$35.23. This program concluded on November 8, 2006 when the
maximum number of shares had been repurchased. This repurchase
plan followed a prior repurchase plan for up to
5,000,000 shares which concluded on January 13, 2006.
The Company repurchased 3,029,700 shares at a weighted
average price of $31.20 per share under this program. On
December 13, 2006, the Company commenced another open
market repurchase program for up to 5,000,000 shares of the
Companys common stock not to exceed $200 million in
repurchases. This program will conclude at the earlier of three
years or when the maximum number of shares have been
repurchased. As of December 31, 2007, the Company has not
repurchased any shares under this program.
39
The following table sets forth the components of the numerator
and denominator for the computation of basic and diluted income
from continuing operations per share (in thousands, except share
data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
stockholders basic
|
|
$
|
59,897
|
|
|
$
|
177,695
|
|
|
$
|
188,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
59,897
|
|
|
$
|
177,695
|
|
|
$
|
188,370
|
|
Interest, net of tax, on 4.25% convertible notes
|
|
|
|
|
|
|
135
|
|
|
|
8,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
stockholders diluted
|
|
$
|
59,897
|
|
|
$
|
177,830
|
|
|
$
|
196,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding basic
|
|
|
93,517,337
|
|
|
|
94,983,646
|
|
|
|
88,601,168
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-employee director options
|
|
|
2,957
|
|
|
|
11,825
|
|
|
|
11,715
|
|
Restricted Stock awards
|
|
|
227,200
|
|
|
|
140,959
|
|
|
|
115,411
|
|
Employee options
|
|
|
894,800
|
|
|
|
951,360
|
|
|
|
1,466,652
|
|
4.25% Convertible notes
|
|
|
|
|
|
|
145,120
|
|
|
|
8,385,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding diluted
|
|
|
94,642,294
|
|
|
|
96,232,910
|
|
|
|
98,579,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive securities outstanding not included in the computation
of earning per share because their effect is antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee options
|
|
|
4,398,307
|
|
|
|
1,261,367
|
|
|
|
31,100
|
|
The Company owns equity interests of 27.5% in four hospitals in
Las Vegas, Nevada, and 26.1% in one hospital in Las Vegas,
Nevada in which Universal Health Systems, Inc. owns the majority
interest; an equity interest of 38.0% in a hospital in Macon,
Georgia in which HCA Inc. owns the majority interest; and an
equity interest of 50.0% in a hospital in El Dorado, Arkansas in
which the SHARE Foundation, a not-for-profit foundation, owns
the remaining 50.0%. These equity investments were acquired as
part of the acquisition of Triad. The Company uses the equity
method of accounting for its investments in these entities. The
balance of the Companys investment in unconsolidated
affiliates is $267.8 million at December 31, 2007, and
is included in other assets in the accompanying consolidated
balance sheet. Included in the Companys results of
operations for the year ended December 31, 2007, is
$25.1 million representing the Companys equity in
pre-tax earnings from investments in unconsolidated affiliates
for the period July 25, 2007 through December 31, 2007.
40
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Summarized combined financial information for the years ended
December 31, 2007 and 2006, for the unconsolidated entities
in which the Company owns an equity interest is as follows (in
thousands):
|
|
|
|
|
|
|
December 31, 2007
|
|
|
|
(Unaudited)
|
|
|
Current assets
|
|
$
|
226,458
|
|
Noncurrent assets
|
|
|
706,059
|
|
|
|
|
|
|
|
|
$
|
932,517
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
81,354
|
|
Noncurrent liabilities
|
|
|
3,079
|
|
Members equity
|
|
|
848,084
|
|
|
|
|
|
|
|
|
$
|
932,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
December 31, 2007
|
|
|
2007
|
|
|
(Unaudited)
|
|
Revenues
|
|
$
|
1,275,117
|
|
Net income
|
|
$
|
160,802
|
|
Prior to the acquisition of Triad, the Company aggregated its
operating segments into one reportable segment as all of its
operating segments had similar services, had similar types of
patients, operated in a consistent manner and had similar
economic and regulatory characteristics. In connection with the
Triad acquisition, management has re-evaluated the information
that is reviewed by the chief operating decision maker and
segment managers and has determined that the Company now
operates in three distinct operating segments, represented by
the hospital operations (which includes our acute care hospitals
and related healthcare entities that provide acute and
outpatient health care services), the home health agencies
operations (which provide outpatient care generally at the
patients home), and our hospital management services
business (which provides executive management services to
non-affliated acute care hospitals). Only the hospital
operations segment meets the criteria in SFAS No. 131
as a separate reportable segment. The financial information for
the home health agencies and management services segment do not
meet the quantitative thresholds defined in
SFAS No. 131 and are combined into the corporate and
all other reportable segment.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies in
Note 1. Expenditures for segment assets are reported on an
accrual basis, which includes amounts that are reflected in
accounts payable (See Note 1). Substantially all
depreciation and amortization as reflected in the consolidated
statements of income relates to the hospital operations segment.
The financial information from prior years has been presented to
reflect this change in the composition of our reportable
operating segments.
41
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The distribution between reportable segments of our revenues,
income from continuing operations before income taxes,
expenditures for segment assets and total assets is summarized
in the following tables (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital operations
|
|
$
|
6,965,152
|
|
|
$
|
4,101,974
|
|
|
$
|
3,516,856
|
|
Corporate and all other
|
|
|
162,342
|
|
|
|
78,162
|
|
|
|
59,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,127,494
|
|
|
$
|
4,180,136
|
|
|
$
|
3,576,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital operations
|
|
$
|
256,274
|
|
|
$
|
360,576
|
|
|
$
|
360,263
|
|
Corporate and all other
|
|
|
(153,374
|
)
|
|
|
(72,729
|
)
|
|
|
(52,089
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
102,900
|
|
|
$
|
287,847
|
|
|
$
|
308,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for segment assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital operations
|
|
$
|
501,671
|
|
|
$
|
232,500
|
|
|
$
|
179,680
|
|
Corporate and all other
|
|
|
32,464
|
|
|
|
39,693
|
|
|
|
20,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
534,135
|
|
|
$
|
272,193
|
|
|
$
|
200,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
Total assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital operations
|
|
$
|
12,176,957
|
|
|
$
|
4,082,271
|
|
|
|
|
|
Corporate and all other
|
|
|
1,316,686
|
|
|
|
424,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,493,643
|
|
|
$
|
4,506,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14.
|
Commitments
and Contingencies
|
Construction Commitments. Pursuant to hospital
purchase agreements in effect as of December 31, 2007, and
where required certificate of need approval has been obtained,
the Company is required to build the following replacement
facilities. The Company has agreed, as part of the acquisition
in 2003 of Southside Regional Medical Center in Petersburg,
Virginia, to build a replacement facility with an aggregate
estimated construction cost, including equipment, of
approximately $145 million. Of this amount, approximately
$98 million has been expended through December 31,
2007. The Company expects to spend approximately
$44 million in replacement hospital construction and
equipment costs related to this project in 2008. This project is
required to be completed in 2008. The Company has agreed, as
part of the acquisition in 2004 of Phoenixville Hospital in
Phoenixville, Pennsylvania, to spend approximately
$90 million in capital expenditures over eight years to
develop and improve the hospital; of this amount approximately
$25 million has been expended through December 2007. The
Company expects to spend approximately $26 million of this
commitment in 2008. The Company has agreed as part of the
acquisition in 2005 of Chestnut Hill Hospital, in Philadelphia,
Pennsylvania to spend approximately $41 million in capital
expenditures over four years to develop and improve the
hospital; of this amount approximately $13 million has been
expended through December 2007. The Company expects to spend
approximately $4 million of this commitment in 2008. As
part of the acquisition in 2005 of Bedford County Medical Center
in Shelbyville, Tennessee, the Company agreed to build a
replacement facility with an aggregate estimated construction
cost of approximately $35 million. Of this amount,
approximately $19 million has been expended through
December 31, 2007. The
42
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company expects to spend approximately $16 million in
replacement hospital construction costs related to this project
in 2008. The project is required to be completed by
June 30, 2009. As required by an amendment to a lease
agreement entered into in 2005, the Company agreed to build a
replacement facility at its Barstow, California location.
Construction costs for this replacement facility are estimated
to be approximately $60 million. Of this amount,
approximately $2 million has been expended through
December 31, 2007. The Company expects to spend
approximately $3 million in replacement hospital
construction and equipment costs related to this project in
2008. This project is required to be completed in 2011. The
Company has agreed, as part of an acquisition in 2007, to build
a replacement hospital in Valparaiso, Indiana with an aggregate
estimated construction cost, including equipment costs, of
approximately $210 million. Of this amount, an immaterial
amount has been expended through December 31, 2007. The
Company expects to spend approximately $5 million in
replacement hospital construction and equipment costs related to
this project in 2008. This project is required to be completed
in 2011. As part of the Triad acquisition, the Company assumed
the commitment to build a replacement hospital in Clarksville,
Tennessee, with an aggregate estimated construction cost,
including equipment costs, of approximately $201 million.
Of this amount, approximately $133 million has been
expended through December 31, 2007. The Company expects to
spend approximately $68 million in replacement hospital
construction and equipment costs related to this project in
2008. This project is required to be completed in 2009. Also, as
part of the Triad acquisition, the Company assumed the
commitment to build a de novo hospital in Cedar Park, Texas,
with an aggregate estimated construction cost, including
equipment costs, of approximately $113 million. Of this
amount, approximately $111 million has been expended
through December 31, 2007. The Company expects to spend
approximately $2 million in replacement hospital
construction and equipment costs related to this project in
2008. This project is required to be completed in 2008. Also in
2005, the Company entered into an agreement with a developer to
build and lease to the Company new corporate headquarters.
Construction of the new headquarters was completed in December
2006. In January 2007, the Company exercised a purchase option
under that lease agreement and acquired the new headquarters by
purchasing the equity interests of the previous owner for a
purchase price of $34.9 million.
Physician Recruiting Commitments. As part of
its physician recruitment strategy, the Company provides income
guarantee agreements to certain physicians who agree to relocate
to its communities and commit to remain in practice there. Under
such agreements, the Company is required to make payments to the
physicians in excess of the amounts they earned in their
practice up to the amount of the income guarantee. These income
guarantee periods are typically for 12 months. Such
payments are recoverable by the Company from physicians who do
not fulfill their commitment period, which is typically three
years, to the respective community. At December 31, 2007,
the maximum potential amount of future payments under these
guarantees in excess of the liability recorded is
$49.4 million.
Professional
Liability Risks.
Professional
Liability Insurance for Former Triad Hospitals
Substantially all of the professional and general liability
risks of the acquired Triad hospitals are subject to a per
occurrence deductible. Substantially all losses in periods prior
to May 1999 are insured through a wholly-owned insurance
subsidiary of HCA, Inc., or HCA, Triads owner prior to
that time, and excess loss policies maintained by HCA. HCA has
agreed to indemnify the Triad hospitals in respect of claims
covered by such insurance policies arising prior to May 1999.
After May 1999, the Triad hospitals obtained insurance coverage
on a claims incurred basis from HCAs
wholly-owned insurance subsidiary with excess coverage obtained
from other carriers that is subject to certain deductibles.
Effective for claims incurred after December 31, 2006,
Triad began insuring its claims from $1 million to
$5 million through its wholly-owned captive insurance
company, replacing the coverage provided by HCA. Substantially
all claims reported on or after January 2007 are self-insured up
to $10 million per claim. Excess insurance for all
hospitals is purchased through commercial insurance companies
and generally after the self-insured amount covers up to
$100 million
43
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
per occurrence. The excess insurance for the Triad hospitals is
underwritten on a claims-made basis. The Company
accrues an estimated liability for its uninsured exposure and
self-insured retention based on historical loss patterns and
actuarial projections.
Professional
Liability Insurance Claims for All Other Community Health
Systems Hospitals
The Company accrues for estimated losses resulting from
professional liability claims. The accrual, which includes an
estimate for incurred but not reported claims, is based on
historical loss patterns and actuarially determined projections
and is discounted to its net present value using a weighted
average risk-free discount rate of 4.1% and 4.6% in 2007 and
2006, respectively. To the extent that subsequent claims
information varies from managements estimates, the
liability is adjusted currently. The Companys insurance is
underwritten on a claims-made basis. Prior to
June 1, 2002, substantially all of the Companys
professional and general liability risks were subject to a
$0.5 million per occurrence deductible; for claims reported
from June 1, 2002 through June 1, 2003, these
deductibles were $2.0 million per occurrence. Additional
coverage above these deductibles was purchased through captive
insurance companies in which the Company had a 7.5% minority
ownership interest in each and to which the premiums paid by the
Company represented less than 8% of the total premiums revenues
of each captive insurance company. With the formation of the
Companys own wholly-owned captive insurance company in
June 2003, the Company terminated its minority interest
relationships in those entities. Substantially all claims
reported after June 1, 2003 and before June 1, 2005
are self-insured up to $4 million per claim. Substantially
all claims reported on or after June 1, 2005 are
self-insured up to $5 million per claim. Management on
occasion has selectively increased the insured risk at certain
hospitals based upon insurance pricing and other factors and may
continue that practice in the future. Excess insurance for all
hospitals was purchased through commercial insurance companies
and generally covers the Company for liabilities in excess of
the self-insured amount and up to $100 million per
occurrence for claims reported on or after June 1, 2003.
The Companys estimated liability for the self-insured
portion of professional and general liability claims was
$300.2 million and $104.2 million as of
December 31, 2007 and 2006, respectively. These estimated
liabilities represent the present value of estimated future
professional liability claims payments based on expected loss
patterns using a weighted-average discount rate of 4.1% and 4.6%
in 2007 and 2006, respectively. The weighted-average discount
rate is based on an estimate of the risk-free interest rate for
the duration of the expected claim payments. The estimated
undiscounted claims liability was $321.5 million and
$119.8 million as of December 31, 2007 and 2006,
respectively.
Legal Matters. The Company is a party to other
legal proceedings incidental to its business. In the opinion of
management, any ultimate liability with respect to these actions
will not have a material adverse effect on the Companys
consolidated financial position, cash flows or results of
operations.
In a letter dated October 4, 2007, the Civil Division of
the Department of Justice notified the Company that, as a result
of an investigation into the way in which different state
Medicaid programs apply to the federal government for matching
or supplemental funds that are ultimately used to pay for a
small portion of the services provided to Medicaid and indigent
patients, it believes the Company and three of its New Mexico
hospitals have caused the State of New Mexico to submit improper
claims for federal funds in violation of the federal False
Claims Act. In a letter dated January 22, 2008, the Civil
Division notified the Company that based on its investigation,
it has calculated that these three hospitals received ineligible
federal participation payments from August 2000 to June 2006 of
approximately $27.5 million. The Civil Division also
advised the Company that were it to proceed to trial, it would
seek treble damages plus an appropriate penalty for each of the
violations of the False Claims Act. The Company continues to
believe that it has not violated the False Claims Act, and is
continuing discussions with the Civil Division in an effort to
resolve this matter.
Other. The Company has entered into a
definitive agreement to acquire Empire Health Services in
Spokane, Washington. The health system includes two full-service
acute care hospitals, Deaconess Medical Center (388
44
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
licensed beds) and Valley Hospital and Medical Center (123
licensed beds), and other outpatient and ancillary services. The
transaction, subject to federal and state approvals, is expected
to close in the third quarter of 2008.
Effective February 1, 2008, the Company sold Russell County
Medical Center (78 licensed beds) located in Lebanon, Virginia
to Mountain States Health Alliance, headquartered in Johnson
City, Tennessee, for $48.6 million.
|
|
16.
|
Quarterly
Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
Total
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Year ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
$
|
1,154,278
|
|
|
$
|
1,197,865
|
|
|
$
|
2,247,009
|
|
|
$
|
2,528,342
|
|
|
$
|
7,127,494
|
|
Income from continuing operations before taxes
|
|
|
93,121
|
|
|
|
87,114
|
|
|
|
31,371
|
|
|
|
(108,706
|
)
|
|
|
102,900
|
|
Income from continuing operations
|
|
|
57,289
|
|
|
|
53,558
|
|
|
|
19,699
|
|
|
|
(70,649
|
)
|
|
|
59,897
|
|
Loss on discontinued operations
|
|
|
(2,965
|
)
|
|
|
205
|
|
|
|
(9,239
|
)
|
|
|
(17,609
|
)
|
|
|
(29,608
|
)
|
Net income
|
|
|
54,324
|
|
|
|
53,763
|
|
|
|
10,460
|
|
|
|
(88,258
|
)
|
|
|
30,289
|
|
Income from continuing operations per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.61
|
|
|
|
0.57
|
|
|
|
0.21
|
|
|
|
(0.75
|
)
|
|
|
0.64
|
|
Diluted
|
|
|
0.61
|
|
|
|
0.57
|
|
|
|
0.21
|
|
|
|
(0.75
|
)
|
|
|
0.63
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.58
|
|
|
|
0.57
|
|
|
|
0.11
|
|
|
|
(0.94
|
)
|
|
|
0.32
|
|
Diluted
|
|
|
0.58
|
|
|
|
0.57
|
|
|
|
0.11
|
|
|
|
(0.94
|
)
|
|
|
0.32
|
|
Weighted-average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
93,402,545
|
|
|
|
93,518,991
|
|
|
|
93,651,645
|
|
|
|
93,664,355
|
|
|
|
93,517,337
|
|
Diluted
|
|
|
94,365,292
|
|
|
|
94,647,870
|
|
|
|
94,841,749
|
|
|
|
93,664,355
|
|
|
|
94,642,294
|
|
Year ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
$
|
986,073
|
|
|
$
|
1,017,337
|
|
|
$
|
1,072,199
|
|
|
$
|
1,104,527
|
|
|
$
|
4,180,136
|
|
Income from continuing operations before taxes
|
|
|
95,447
|
|
|
|
86,106
|
|
|
|
18,199
|
|
|
|
88,095
|
|
|
|
287,847
|
|
Income from continuing operations
|
|
|
58,484
|
|
|
|
52,963
|
|
|
|
11,344
|
|
|
|
54,904
|
|
|
|
177,695
|
|
Loss on discontinued operations
|
|
|
(4,446
|
)
|
|
|
(594
|
)
|
|
|
(3,103
|
)
|
|
|
(1,289
|
)
|
|
|
(9,432
|
)
|
Net income
|
|
|
54,038
|
|
|
|
52,369
|
|
|
|
8,241
|
|
|
|
53,615
|
|
|
|
168,263
|
|
Income from continuing operations per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.61
|
|
|
|
0.55
|
|
|
|
0.12
|
|
|
|
0.59
|
|
|
|
1.87
|
|
Diluted
|
|
|
0.60
|
|
|
|
0.55
|
|
|
|
0.12
|
|
|
|
0.58
|
|
|
|
1.85
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.56
|
|
|
|
0.55
|
|
|
|
0.09
|
|
|
|
0.57
|
|
|
|
1.77
|
|
Diluted
|
|
|
0.55
|
|
|
|
0.54
|
|
|
|
0.09
|
|
|
|
0.57
|
|
|
|
1.75
|
|
Weighted-average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
96,552,448
|
|
|
|
95,769,030
|
|
|
|
94,119,020
|
|
|
|
93,538,958
|
|
|
|
94,983,646
|
|
Diluted
|
|
|
98,209,271
|
|
|
|
96,870,315
|
|
|
|
95,258,771
|
|
|
|
94,644,589
|
|
|
|
96,232,910
|
|
Net operating revenues in the third and fourth quarter of the
year ended December 31, 2007 include the results of
operations of the former Triad hospitals and other operations
subsequent to the acquisition date of July 25, 2007. Also,
net operating revenues and income from continuing operations in
the fourth quarter of the year ended December 31, 2007 give
effect to the $96.3 million increase in contractual
reserves and $70.1 million increase to the allowance for
doubtful accounts resulting from managements analysis of
the net realizable value of the Companys accounts
receivable during the fourth quarter (see Note 1).
45
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
17.
|
Supplemental
Condensed Consolidating Financial Information
|
In connection with the consummation of the Triad acquisition in
July, 2007, the Company obtained $7.215 billion of senior
secured financing under the New Credit Facility and CHS issued
the Notes in the aggregate principal amount of
$3.021 billion. The Notes are senior unsecured obligations
of CHS and are guaranteed on a senior basis by the Company and
by certain existing and subsequently acquired or organized 100%
owned domestic subsidiaries.
The Notes are fully and unconditionally guaranteed on a joint
and several basis. The following condensed consolidating
financial statements present the Company (as parent guarantor),
CHS (as the issuer), the subsidiary guarantors, the subsidiary non-guarantors and
eliminations. These supplemental condensed consolidating
financial statements have been prepared and presented in
accordance with SEC
Regulation S-X
Rule 3-10
Financial Statements of Guarantors and Issuers of
Guaranteed Securities Registered or Being Registered.
The presentation of intercompany balances and allocated income
tax expense in the Companys previously issued supplemental
condensed consolidating financial statements is being corrected
as follows:
|
|
|
|
|
Intercompany receivables and payables are presented gross in the
supplemental consolidating balance sheets; the intercompany
balances were previously reported net as intercompany
(receivable) payable. In addition, a portion of the
intercompany (receivable) payable was netted against
long-term debt payable (receivable) of the Issuer
and other guarantors.
|
|
|
|
Cash flows from intercompany transactions are presented in cash
flows from financing activities, as changes in intercompany
balances with affiliates, net; these cash flows were previously
reported in cash flows from operating activities as
advances to subsidiaries, net of return of
investment and other operating cash flows.
|
|
|
|
Income tax expense is allocated from the parent guarantor to the
income producing operations (other guarantors and
non-guarantors) and the Issuer through shareholders
equity; income tax expense was previously allocated entirely to
the Parent Guarantor, which is the tax paying entity. As this
approach represents an allocation, the income tax expense
allocation is considered non-cash for statement of cash flow
purposes.
|
|
|
|
Interest expense, net has been presented to reflect net interest
expense and interest income from outstanding long-term debt and
intercompany balances; these interest expense and interest
income amounts were previously netted within certain
subsidiaries.
|
The Companys intercompany activity consists primarily of
daily cash transfers for purposes of cash management, the
allocation of certain expenses and expenditures paid for by the
parent on behalf of its subsidiaries, and the push down of
investment in its subsidiaries. The Companys subsidiaries
generally do not purchase services from one another and
therefore the intercompany transactions do not represent revenue
generating transactions. All intercompany transactions eliminate
in consolidation. Therefore, the aforementioned corrections do
not impact the Companys consolidated balance sheet,
consolidated statement of income or consolidated statement of
cash flows for any period presented. Management believes the
effects of these corrections are not material to the
Companys previously issued consolidated financial
statements.
The following tables disclose the impact of
these corrections on each of the respective line items of the
supplemental condensed consolidating financial statements as of
and for the periods ending December 31, 2007, 2006 and 2005 (in thousands).
46
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and taxes
|
|
$
|
|
|
|
$
|
102
|
|
|
$
|
156,733
|
|
|
$
|
12,921
|
|
|
$
|
|
|
|
$
|
169,756
|
|
|
|
|
|
Total current assets
|
|
|
113,741
|
|
|
|
102
|
|
|
|
1,518,022
|
|
|
|
921,033
|
|
|
|
|
|
|
|
2,552,898
|
|
|
|
|
|
Intercompany receivables (non-current)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
96,671
|
|
|
|
|
|
|
|
2,162,601
|
|
|
|
1,988,442
|
|
|
|
|
|
|
|
4,247,714
|
|
|
|
|
|
Net investment in subsidiaries
|
|
|
1,519,952
|
|
|
|
1,464,944
|
|
|
|
4,968,905
|
|
|
|
|
|
|
|
(7,953,801
|
)
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
1,730,364
|
|
|
|
1,654,186
|
|
|
|
12,593,604
|
|
|
|
5,469,290
|
|
|
|
(7,953,801
|
)
|
|
|
13,493,643
|
|
|
|
|
|
Long-term debt
|
|
|
4
|
|
|
|
4,487,090
|
|
|
|
4,633,801
|
|
|
|
(43,528
|
)
|
|
|
|
|
|
|
9,077,367
|
|
|
|
|
|
Intercompany payables (non-current)
|
|
|
(385,872
|
)
|
|
|
(4,627,439
|
)
|
|
|
5,956,358
|
|
|
|
4,562,215
|
|
|
|
(5,505,262
|
)
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
(2,519
|
)
|
|
|
121,482
|
|
|
|
188,316
|
|
|
|
176,180
|
|
|
|
|
|
|
|
483,459
|
|
|
|
|
|
Additional paid-in capital
|
|
|
1,240,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,240,308
|
|
|
|
|
|
Retained earnings
|
|
|
557,945
|
|
|
|
1,601,686
|
|
|
|
1,066,671
|
|
|
|
(134,094
|
)
|
|
|
(2,534,263
|
)
|
|
|
557,945
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,710,804
|
|
|
|
1,519,949
|
|
|
|
1,062,682
|
|
|
|
(134,092
|
)
|
|
|
(2,448,539
|
)
|
|
|
1,710,804
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
|
1,730,364
|
|
|
|
1,654,186
|
|
|
|
12,593,604
|
|
|
|
5,469,290
|
|
|
|
(7,953,801
|
)
|
|
|
13,493,643
|
|
|
|
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and taxes
|
|
|
99,417
|
|
|
|
102
|
|
|
|
57,316
|
|
|
|
12,921
|
|
|
|
|
|
|
|
169,756
|
|
|
|
|
|
Total current assets
|
|
|
213,158
|
|
|
|
102
|
|
|
|
1,418,605
|
|
|
|
921,033
|
|
|
|
|
|
|
|
2,552,898
|
|
|
|
|
|
Intercompany receivables (non-current)
|
|
|
1,085,684
|
|
|
|
9,129,859
|
|
|
|
18,854,467
|
|
|
|
884,296
|
|
|
|
(29,954,306
|
)
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
2,259,113
|
|
|
|
1,988,601
|
|
|
|
|
|
|
|
4,247,714
|
|
|
|
|
|
Net investment in subsidiaries
|
|
|
957,750
|
|
|
|
4,168,316
|
|
|
|
2,485,035
|
|
|
|
|
|
|
|
(7,611,101
|
)
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
2,256,592
|
|
|
|
13,487,417
|
|
|
|
28,961,296
|
|
|
|
6,353,745
|
|
|
|
(37,565,407
|
)
|
|
|
13,493,643
|
|
|
|
|
|
Long-term debt
|
|
|
4
|
|
|
|
8,987,090
|
|
|
|
62,792
|
|
|
|
27,481
|
|
|
|
|
|
|
|
9,077,367
|
|
|
|
|
|
Intercompany payables (non-current)
|
|
|
137,837
|
|
|
|
3,267,993
|
|
|
|
27,008,767
|
|
|
|
5,378,021
|
|
|
|
(35,792,618
|
)
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
|
|
121,482
|
|
|
|
188,316
|
|
|
|
173,661
|
|
|
|
|
|
|
|
483,459
|
|
|
|
|
|
Additional paid-in capital
|
|
|
1,240,308
|
|
|
|
434,505
|
|
|
|
398,338
|
|
|
|
|
|
|
|
(832,843
|
)
|
|
|
1,240,308
|
|
|
|
|
|
Retained earnings
|
|
|
557,945
|
|
|
|
604,980
|
|
|
|
554,624
|
|
|
|
(133,935
|
)
|
|
|
(1,025,669
|
)
|
|
|
557,945
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,710,804
|
|
|
|
957,748
|
|
|
|
948,974
|
|
|
|
(133,933
|
)
|
|
|
(1,772,789
|
)
|
|
|
1,710,804
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
|
2,256,592
|
|
|
|
13,487,417
|
|
|
|
28,961,296
|
|
|
|
6,353,745
|
|
|
|
(37,565,407
|
)
|
|
|
13,493,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
290,438
|
|
|
|
(326,264
|
)
|
|
|
707,127
|
|
|
|
16,437
|
|
|
|
|
|
|
|
687,738
|
|
|
|
|
|
Changes in intercompany balances with affiliates, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(290,438
|
)
|
|
|
7,196,560
|
|
|
|
(137,159
|
)
|
|
|
134,465
|
|
|
|
|
|
|
|
6,903,428
|
|
|
|
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(85,881
|
)
|
|
|
141,137
|
|
|
|
417,930
|
|
|
|
214,552
|
|
|
|
|
|
|
|
687,738
|
|
|
|
|
|
Changes in intercompany balances with affiliates, net
|
|
|
376,319
|
|
|
|
(468,160
|
)
|
|
|
360,206
|
|
|
|
(268,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
85,881
|
|
|
|
6,728,400
|
|
|
|
152,038
|
|
|
|
(62,891
|
)
|
|
|
|
|
|
|
6,903,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
(160,144
|
)
|
|
|
455,541
|
|
|
|
69,136
|
|
|
|
|
|
|
|
364,533
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(73,292
|
)
|
|
|
59,464
|
|
|
|
74,773
|
|
|
|
|
|
|
|
(86,077
|
)
|
|
|
(25,132
|
)
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
73,292
|
|
|
|
73,292
|
|
|
|
(59,464
|
)
|
|
|
(70,297
|
)
|
|
|
86,077
|
|
|
|
102,900
|
|
|
|
|
|
Provision for income taxes
|
|
|
43,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,003
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
30,289
|
|
|
|
73,292
|
|
|
|
(59,464
|
)
|
|
|
(70,297
|
)
|
|
|
86,077
|
|
|
|
59,897
|
|
|
|
|
|
Net income
|
|
$
|
30,289
|
|
|
$
|
73,292
|
|
|
$
|
(59,464
|
)
|
|
$
|
(99,905
|
)
|
|
$
|
86,077
|
|
|
$
|
30,289
|
|
|
|
|
|
47
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
$
|
|
|
|
$
|
67,495
|
|
|
$
|
227,902
|
|
|
$
|
69,136
|
|
|
$
|
|
|
|
$
|
364,533
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(30,289
|
)
|
|
|
(114,008
|
)
|
|
|
43,066
|
|
|
|
|
|
|
|
76,099
|
|
|
|
(25,132
|
)
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
30,289
|
|
|
|
19,125
|
|
|
|
199,880
|
|
|
|
(70,295
|
)
|
|
|
(76,099
|
)
|
|
|
102,900
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
(11,164
|
)
|
|
|
83,550
|
|
|
|
(29,383
|
)
|
|
|
|
|
|
|
43,003
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
30,289
|
|
|
|
30,289
|
|
|
|
116,330
|
|
|
|
(40,912
|
)
|
|
|
(76,099
|
)
|
|
|
59,897
|
|
|
|
|
|
Net income
|
|
$
|
30,289
|
|
|
$
|
30,289
|
|
|
$
|
116,330
|
|
|
$
|
(70,520
|
)
|
|
$
|
(76,099
|
)
|
|
$
|
30,289
|
|
|
|
|
|
48
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivables (non-current)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Net investment in subsidiaries
|
|
|
1,085,218
|
|
|
|
1,071,903
|
|
|
|
420,246
|
|
|
|
|
|
|
|
(2,577,367
|
)
|
|
|
|
|
Total Assets
|
|
|
1,098,467
|
|
|
|
1,092,707
|
|
|
|
4,064,626
|
|
|
|
828,146
|
|
|
|
(2,577,367
|
)
|
|
|
4,506,579
|
|
Current income taxes payable
|
|
|
|
|
|
|
|
|
|
|
7,626
|
|
|
|
|
|
|
|
|
|
|
|
7,626
|
|
Total current liabilities
|
|
|
867
|
|
|
|
21,866
|
|
|
|
443,751
|
|
|
|
108,799
|
|
|
|
|
|
|
|
575,283
|
|
Long-term debt
|
|
|
300,000
|
|
|
|
1,556,000
|
|
|
|
24,942
|
|
|
|
24,839
|
|
|
|
|
|
|
|
1,905,781
|
|
Intercompany payables (non-current)
|
|
|
(1,067,545
|
)
|
|
|
(1,570,373
|
)
|
|
|
2,403,385
|
|
|
|
709,118
|
|
|
|
(474,585
|
)
|
|
|
|
|
Additional paid-in capital
|
|
|
1,195,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,195,947
|
|
Retained earnings
|
|
|
527,656
|
|
|
|
1,079,416
|
|
|
|
1,074,675
|
|
|
|
(49,594
|
)
|
|
|
(2,104,497
|
)
|
|
|
527,656
|
|
Total stockholders equity
|
|
|
1,723,673
|
|
|
|
1,085,214
|
|
|
|
1,067,160
|
|
|
|
(49,592
|
)
|
|
|
(2,102,782
|
)
|
|
|
1,723,673
|
|
Total liabilities and stockholders equity
|
|
|
1,098,467
|
|
|
|
1,092,707
|
|
|
|
4,064,626
|
|
|
|
828,146
|
|
|
|
(2,577,367
|
)
|
|
|
4,506,579
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivables (non-current)
|
|
|
1,360,530
|
|
|
|
5,620,834
|
|
|
|
5,590,489
|
|
|
|
275,417
|
|
|
|
(12,847,270
|
)
|
|
|
|
|
Net investment in subsidiaries
|
|
|
975,063
|
|
|
|
1,650,140
|
|
|
|
415,506
|
|
|
|
|
|
|
|
(3,040,709
|
)
|
|
|
|
|
Total Assets
|
|
|
2,348,842
|
|
|
|
7,291,778
|
|
|
|
9,650,375
|
|
|
|
1,103,563
|
|
|
|
(15,887,979
|
)
|
|
|
4,506,579
|
|
Current income taxes payable
|
|
|
7,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,626
|
|
Total current liabilities
|
|
|
8,493
|
|
|
|
21,866
|
|
|
|
436,125
|
|
|
|
108,799
|
|
|
|
|
|
|
|
575,283
|
|
Long-term debt
|
|
|
300,000
|
|
|
|
1,556,000
|
|
|
|
24,942
|
|
|
|
24,839
|
|
|
|
|
|
|
|
1,905,781
|
|
Intercompany payables (non-current)
|
|
|
175,204
|
|
|
|
4,738,853
|
|
|
|
8,083,418
|
|
|
|
984,535
|
|
|
|
(13,982,010
|
)
|
|
|
|
|
Additional paid-in capital
|
|
|
1,195,947
|
|
|
|
371,227
|
|
|
|
375,072
|
|
|
|
|
|
|
|
(746,299
|
)
|
|
|
1,195,947
|
|
Retained earnings
|
|
|
527,656
|
|
|
|
598,034
|
|
|
|
612,946
|
|
|
|
(49,594
|
)
|
|
|
(1,161,386
|
)
|
|
|
527,656
|
|
Total stockholders equity
|
|
|
1,723,673
|
|
|
|
975,059
|
|
|
|
980,502
|
|
|
|
(49,592
|
)
|
|
|
(1,905,969
|
)
|
|
|
1,723,673
|
|
Total liabilities and stockholders equity
|
|
|
2,348,842
|
|
|
|
7,291,778
|
|
|
|
9,650,375
|
|
|
|
1,103,563
|
|
|
|
(15,887,979
|
)
|
|
|
4,506,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
155,052
|
|
|
|
(387,000
|
)
|
|
|
487,607
|
|
|
|
94,596
|
|
|
|
|
|
|
|
350,255
|
|
Changes in intercompany balances with affiliates, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(155,052
|
)
|
|
|
387,000
|
|
|
|
(5,734
|
)
|
|
|
246
|
|
|
|
|
|
|
|
226,460
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(151,205
|
)
|
|
|
(20,514
|
)
|
|
|
522,332
|
|
|
|
(358
|
)
|
|
|
|
|
|
|
350,255
|
|
Changes in intercompany balances with affiliates, net
|
|
|
306,257
|
|
|
|
(366,486
|
)
|
|
|
(34,725
|
)
|
|
|
94,954
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
151,205
|
|
|
|
20,514
|
|
|
|
(40,459
|
)
|
|
|
95,200
|
|
|
|
|
|
|
|
226,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
71,793
|
|
|
|
22,618
|
|
|
|
|
|
|
|
94,411
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(278,415
|
)
|
|
|
(278,415
|
)
|
|
|
53,778
|
|
|
|
|
|
|
|
503,052
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
278,415
|
|
|
|
278,415
|
|
|
|
273,103
|
|
|
|
(39,034
|
)
|
|
|
(503,052
|
)
|
|
|
287,847
|
|
Provision for income taxes
|
|
|
110,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,152
|
|
Income (loss) from continuing operations
|
|
|
168,263
|
|
|
|
278,415
|
|
|
|
273,103
|
|
|
|
(39,034
|
)
|
|
|
(503,052
|
)
|
|
|
177,695
|
|
Net income
|
|
|
168,263
|
|
|
|
278,415
|
|
|
|
273,103
|
|
|
|
(48,466
|
)
|
|
|
(503,052
|
)
|
|
|
168,263
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
14,130
|
|
|
|
57,663
|
|
|
|
22,618
|
|
|
|
|
|
|
|
94,411
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(168,263
|
)
|
|
|
(191,759
|
)
|
|
|
38,829
|
|
|
|
|
|
|
|
321,193
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
168,263
|
|
|
|
177,629
|
|
|
|
302,182
|
|
|
|
(39,034
|
)
|
|
|
(321,193
|
)
|
|
|
287,847
|
|
Provision for income taxes
|
|
|
|
|
|
|
9,366
|
|
|
|
115,736
|
|
|
|
(14,950
|
)
|
|
|
|
|
|
|
110,152
|
|
Income (loss) from continuing operations
|
|
|
168,263
|
|
|
|
168,263
|
|
|
|
186,446
|
|
|
|
(24,084
|
)
|
|
|
(321,193
|
)
|
|
|
177,695
|
|
Net income
|
|
$
|
168,263
|
|
|
$
|
168,263
|
|
|
$
|
186,446
|
|
|
$
|
(33,516
|
)
|
|
$
|
(321,193
|
)
|
|
$
|
168,263
|
|
49
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
30,571
|
|
|
$
|
12,000
|
|
|
$
|
333,376
|
|
|
$
|
35,102
|
|
|
$
|
|
|
|
$
|
411,049
|
|
Changes in intercompany balances with affiliates, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(30,571
|
)
|
|
|
(12,000
|
)
|
|
|
(13,122
|
)
|
|
|
(6,474
|
)
|
|
|
|
|
|
|
(62,167
|
)
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(67,739
|
)
|
|
|
(38,924
|
)
|
|
|
469,028
|
|
|
|
48,684
|
|
|
|
|
|
|
|
411,049
|
|
Changes in intercompany balances with affiliates, net
|
|
|
98,310
|
|
|
|
50,924
|
|
|
|
(135,652
|
)
|
|
|
(13,582
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
67,739
|
|
|
|
38,924
|
|
|
|
(148,774
|
)
|
|
|
(20,056
|
)
|
|
|
|
|
|
|
(62,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
(9
|
)
|
|
|
67,927
|
|
|
|
19,267
|
|
|
|
|
|
|
|
87,185
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(287,348
|
)
|
|
|
(287,499
|
)
|
|
|
15,315
|
|
|
|
|
|
|
|
559,532
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
287,348
|
|
|
|
287,508
|
|
|
|
287,499
|
|
|
|
5,351
|
|
|
|
(559,532
|
)
|
|
|
308,174
|
|
Provision for income taxes
|
|
|
119,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,804
|
|
Income (loss) from continuing operations
|
|
|
167,544
|
|
|
|
287,508
|
|
|
|
287,499
|
|
|
|
5,351
|
|
|
|
(559,532
|
)
|
|
|
188,370
|
|
Net income
|
|
|
167,544
|
|
|
|
287,508
|
|
|
|
287,499
|
|
|
|
(15,475
|
)
|
|
|
(559,532
|
)
|
|
|
167,544
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
34,930
|
|
|
|
32,988
|
|
|
|
19,267
|
|
|
|
|
|
|
|
87,185
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(167,544
|
)
|
|
|
(195,805
|
)
|
|
|
17,143
|
|
|
|
|
|
|
|
346,206
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
167,544
|
|
|
|
160,875
|
|
|
|
320,610
|
|
|
|
5,351
|
|
|
|
(346,206
|
)
|
|
|
308,174
|
|
Provision for income taxes
|
|
|
|
|
|
|
(6,669
|
)
|
|
|
124,397
|
|
|
|
2,076
|
|
|
|
|
|
|
|
119,804
|
|
Income (loss) from continuing operations
|
|
|
167,544
|
|
|
|
167,544
|
|
|
|
196,213
|
|
|
|
3,275
|
|
|
|
(346,206
|
)
|
|
|
188,370
|
|
Net income
|
|
$
|
167,544
|
|
|
$
|
167,544
|
|
|
$
|
196,213
|
|
|
$
|
(17,551
|
)
|
|
$
|
(346,206
|
)
|
|
$
|
167,544
|
|
|
|
|
(1) |
|
Includes effects of reclassification for discontinued operations and for conforming corrections as applied to other periods presented. |
50
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31,
2007
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands, except for share data)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
|
|
|
$
|
114,075
|
|
|
$
|
18,799
|
|
|
$
|
|
|
|
$
|
132,874
|
|
Patient accounts receivable, net of allowance for doubtful
accounts
|
|
|
|
|
|
|
|
|
|
|
954,106
|
|
|
|
579,692
|
|
|
|
|
|
|
|
1,533,798
|
|
Supplies
|
|
|
|
|
|
|
|
|
|
|
163,961
|
|
|
|
98,942
|
|
|
|
|
|
|
|
262,903
|
|
Deferred income taxes
|
|
|
113,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,741
|
|
Prepaid expenses and taxes
|
|
|
99,417
|
|
|
|
102
|
|
|
|
57,316
|
|
|
|
12,921
|
|
|
|
|
|
|
|
169,756
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
129,147
|
|
|
|
210,679
|
|
|
|
|
|
|
|
339,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
213,158
|
|
|
|
102
|
|
|
|
1,418,605
|
|
|
|
921,033
|
|
|
|
|
|
|
|
2,552,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable
|
|
|
1,085,684
|
|
|
|
9,129,859
|
|
|
|
18,854,467
|
|
|
|
884,296
|
|
|
|
(29,954,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
3,667,487
|
|
|
|
1,845,087
|
|
|
|
|
|
|
|
5,512,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
2,259,113
|
|
|
|
1,988,601
|
|
|
|
|
|
|
|
4,247,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets, net of accumulated amortization
|
|
|
|
|
|
|
189,140
|
|
|
|
276,589
|
|
|
|
714,728
|
|
|
|
|
|
|
|
1,180,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in subsidiaries
|
|
|
957,750
|
|
|
|
4,168,316
|
|
|
|
2,485,035
|
|
|
|
|
|
|
|
(7,611,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,256,592
|
|
|
$
|
13,487,417
|
|
|
$
|
28,961,296
|
|
|
$
|
6,353,745
|
|
|
$
|
(37,565,407
|
)
|
|
$
|
13,493,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,603
|
|
|
$
|
4,107
|
|
|
$
|
|
|
|
$
|
20,710
|
|
Accounts payable
|
|
|
|
|
|
|
19
|
|
|
|
276,503
|
|
|
|
216,171
|
|
|
|
|
|
|
|
492,693
|
|
Current income taxes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation
|
|
|
|
|
|
|
|
|
|
|
231,500
|
|
|
|
172,098
|
|
|
|
|
|
|
|
403,598
|
|
Interest payable (receivable)
|
|
|
|
|
|
|
153,085
|
|
|
|
8,042
|
|
|
|
(7,295
|
)
|
|
|
|
|
|
|
153,832
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
206,308
|
|
|
|
170,794
|
|
|
|
|
|
|
|
377,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
153,104
|
|
|
|
738,956
|
|
|
|
555,875
|
|
|
|
|
|
|
|
1,447,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt payable
|
|
|
4
|
|
|
|
8,987,090
|
|
|
|
62,792
|
|
|
|
27,481
|
|
|
|
|
|
|
|
9,077,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payable
|
|
|
137,837
|
|
|
|
3,267,993
|
|
|
|
27,008,767
|
|
|
|
5,378,021
|
|
|
|
(35,792,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
407,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
407,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
|
|
121,482
|
|
|
|
188,316
|
|
|
|
173,661
|
|
|
|
|
|
|
|
483,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests in equity of consolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
|
13,491
|
|
|
|
352,640
|
|
|
|
|
|
|
|
366,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
966
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
966
|
|
Additional paid-in capital
|
|
|
1,240,308
|
|
|
|
434,505
|
|
|
|
398,338
|
|
|
|
|
|
|
|
(832,843
|
)
|
|
|
1,240,308
|
|
Treasury stock, at cost
|
|
|
(6,678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,678
|
)
|
Accumulated other comprehensive income
|
|
|
(81,737
|
)
|
|
|
(81,737
|
)
|
|
|
(3,989
|
)
|
|
|
|
|
|
|
85,726
|
|
|
|
(81,737
|
)
|
Retained earnings
|
|
|
557,945
|
|
|
|
604,980
|
|
|
|
554,624
|
|
|
|
(133,935
|
)
|
|
|
(1,025,669
|
)
|
|
|
557,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,710,804
|
|
|
|
957,748
|
|
|
|
948,974
|
|
|
|
(133,933
|
)
|
|
|
(1,772,789
|
)
|
|
|
1,710,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,256,592
|
|
|
$
|
13,487,417
|
|
|
$
|
28,961,296
|
|
|
$
|
6,353,745
|
|
|
$
|
(37,565,407
|
)
|
|
$
|
13,493,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31,
2006
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands, except for share data)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
|
|
|
$
|
28,560
|
|
|
$
|
12,006
|
|
|
$
|
|
|
|
$
|
40,566
|
|
Patient accounts receivable, net of allowance for doubtful
accounts
|
|
|
|
|
|
|
|
|
|
|
607,460
|
|
|
|
166,524
|
|
|
|
|
|
|
|
773,984
|
|
Supplies
|
|
|
|
|
|
|
|
|
|
|
87,688
|
|
|
|
25,632
|
|
|
|
|
|
|
|
113,320
|
|
Deferred income taxes
|
|
|
13,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,249
|
|
Prepaid expenses and taxes
|
|
|
|
|
|
|
|
|
|
|
31,586
|
|
|
|
799
|
|
|
|
|
|
|
|
32,385
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
25,827
|
|
|
|
22,053
|
|
|
|
|
|
|
|
47,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
13,249
|
|
|
|
|
|
|
|
781,121
|
|
|
|
227,014
|
|
|
|
|
|
|
|
1,021,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable
|
|
|
1,360,530
|
|
|
|
5,620,834
|
|
|
|
5,590,489
|
|
|
|
275,417
|
|
|
|
(12,847,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
1,580,301
|
|
|
|
406,276
|
|
|
|
|
|
|
|
1,986,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
1,159,545
|
|
|
|
176,980
|
|
|
|
|
|
|
|
1,336,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets, net of accumulated amortization
|
|
|
|
|
|
|
20,804
|
|
|
|
123,413
|
|
|
|
17,876
|
|
|
|
|
|
|
|
162,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in subsidiaries
|
|
|
975,063
|
|
|
|
1,650,140
|
|
|
|
415,506
|
|
|
|
|
|
|
|
(3,040,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,348,842
|
|
|
$
|
7,291,778
|
|
|
$
|
9,650,375
|
|
|
$
|
1,103,563
|
|
|
$
|
(15,887,979
|
)
|
|
$
|
4,506,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
|
|
|
$
|
16,000
|
|
|
$
|
20,065
|
|
|
$
|
(669
|
)
|
|
$
|
|
|
|
$
|
35,396
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
201,340
|
|
|
|
46,407
|
|
|
|
|
|
|
|
247,747
|
|
Current income taxes payable
|
|
|
7,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,626
|
|
Accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation
|
|
|
|
|
|
|
|
|
|
|
127,620
|
|
|
|
34,568
|
|
|
|
|
|
|
|
162,188
|
|
Interest payable
|
|
|
867
|
|
|
|
5,866
|
|
|
|
316
|
|
|
|
73
|
|
|
|
|
|
|
|
7,122
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
86,784
|
|
|
|
28,420
|
|
|
|
|
|
|
|
115,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
8,493
|
|
|
|
21,866
|
|
|
|
436,125
|
|
|
|
108,799
|
|
|
|
|
|
|
|
575,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt payable
|
|
|
300,000
|
|
|
|
1,556,000
|
|
|
|
24,942
|
|
|
|
24,839
|
|
|
|
|
|
|
|
1,905,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payable
|
|
|
175,204
|
|
|
|
4,738,853
|
|
|
|
8,083,418
|
|
|
|
984,535
|
|
|
|
(13,982,010
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
141,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
124,886
|
|
|
|
11,925
|
|
|
|
|
|
|
|
136,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests in equity of consolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
|
502
|
|
|
|
23,057
|
|
|
|
|
|
|
|
23,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
950
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
950
|
|
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
1,195,947
|
|
|
|
371,227
|
|
|
|
375,072
|
|
|
|
|
|
|
|
(746,299
|
)
|
|
|
1,195,947
|
|
Treasury stock, at cost
|
|
|
(6,678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,678
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
5,798
|
|
|
|
5,798
|
|
|
|
(7,517
|
)
|
|
|
|
|
|
|
1,719
|
|
|
|
5,798
|
|
Retained earnings
|
|
|
527,656
|
|
|
|
598,034
|
|
|
|
612,946
|
|
|
|
(49,594
|
)
|
|
|
(1,161,386
|
)
|
|
|
527,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,723,673
|
|
|
|
975,059
|
|
|
|
980,502
|
|
|
|
(49,592
|
)
|
|
|
(1,905,969
|
)
|
|
|
1,723,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,348,842
|
|
|
$
|
7,291,778
|
|
|
$
|
9,650,375
|
|
|
$
|
1,103,563
|
|
|
$
|
(15,887,979
|
)
|
|
$
|
4,506,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year
Ended December 31, 2007
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net operating revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,932,207
|
|
|
$
|
2,195,287
|
|
|
$
|
|
|
|
$
|
7,127,494
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
|
|
|
|
1,896,340
|
|
|
|
998,637
|
|
|
|
|
|
|
|
2,894,977
|
|
Provision for bad debts
|
|
|
|
|
|
|
|
|
|
|
664,619
|
|
|
|
232,666
|
|
|
|
|
|
|
|
897,285
|
|
Supplies
|
|
|
|
|
|
|
|
|
|
|
628,922
|
|
|
|
315,846
|
|
|
|
|
|
|
|
944,768
|
|
Other operating expenses
|
|
|
|
|
|
|
|
|
|
|
960,096
|
|
|
|
472,902
|
|
|
|
|
|
|
|
1,432,998
|
|
Rent
|
|
|
|
|
|
|
|
|
|
|
91,836
|
|
|
|
63,730
|
|
|
|
|
|
|
|
155,566
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
218,723
|
|
|
|
97,492
|
|
|
|
|
|
|
|
316,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
4,460,536
|
|
|
|
2,181,273
|
|
|
|
|
|
|
|
6,641,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
471,671
|
|
|
|
14,014
|
|
|
|
|
|
|
|
485,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
67,495
|
|
|
|
227,902
|
|
|
|
69,136
|
|
|
|
|
|
|
|
364,533
|
|
Loss from early extinguishment of debt
|
|
|
|
|
|
|
27,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,388
|
|
Minority interest in earnings
|
|
|
|
|
|
|
|
|
|
|
823
|
|
|
|
15,173
|
|
|
|
|
|
|
|
15,996
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(30,289
|
)
|
|
|
(114,008
|
)
|
|
|
43,066
|
|
|
|
|
|
|
|
76,099
|
|
|
|
(25,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
30,289
|
|
|
|
19,125
|
|
|
|
199,880
|
|
|
|
(70,295
|
)
|
|
|
(76,099
|
)
|
|
|
102,900
|
|
Provision for income taxes
|
|
|
|
|
|
|
(11,164
|
)
|
|
|
83,550
|
|
|
|
(29,383
|
)
|
|
|
|
|
|
|
43,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
30,289
|
|
|
|
30,289
|
|
|
|
116,330
|
|
|
|
(40,912
|
)
|
|
|
(76,099
|
)
|
|
|
59,897
|
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of hospitals sold or held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,067
|
)
|
|
|
|
|
|
|
(11,067
|
)
|
Net loss on sale of hospitals and partnership interests, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,594
|
)
|
|
|
|
|
|
|
(2,594
|
)
|
Impairment of long-lived assets of hospitals held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,947
|
)
|
|
|
|
|
|
|
(15,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,608
|
)
|
|
|
|
|
|
|
(29,608
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
30,289
|
|
|
$
|
30,289
|
|
|
$
|
116,330
|
|
|
$
|
(70,520
|
)
|
|
$
|
(76,099
|
)
|
|
$
|
30,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year
Ended December 31, 2006
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net operating revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,344,830
|
|
|
$
|
835,306
|
|
|
$
|
|
|
|
$
|
4,180,136
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
|
|
|
|
1,278,676
|
|
|
|
382,943
|
|
|
|
|
|
|
|
1,661,619
|
|
Provision for bad debts
|
|
|
|
|
|
|
|
|
|
|
406,095
|
|
|
|
112,766
|
|
|
|
|
|
|
|
518,861
|
|
Supplies
|
|
|
|
|
|
|
|
|
|
|
390,147
|
|
|
|
97,631
|
|
|
|
|
|
|
|
487,778
|
|
Rent
|
|
|
|
|
|
|
|
|
|
|
64,544
|
|
|
|
27,399
|
|
|
|
|
|
|
|
91,943
|
|
Other operating expenses
|
|
|
|
|
|
|
|
|
|
|
658,746
|
|
|
|
196,850
|
|
|
|
|
|
|
|
855,596
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
147,885
|
|
|
|
31,397
|
|
|
|
|
|
|
|
179,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
2,946,093
|
|
|
|
848,986
|
|
|
|
|
|
|
|
3,795,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
398,737
|
|
|
|
(13,680
|
)
|
|
|
|
|
|
|
385,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
14,130
|
|
|
|
57,663
|
|
|
|
22,618
|
|
|
|
|
|
|
|
94,411
|
|
Loss from early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Minority interest in earnings
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
2,736
|
|
|
|
|
|
|
|
2,795
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(168,263
|
)
|
|
|
(191,759
|
)
|
|
|
38,829
|
|
|
|
|
|
|
|
321,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
168,263
|
|
|
|
177,629
|
|
|
|
302,182
|
|
|
|
(39,034
|
)
|
|
|
(321,193
|
)
|
|
|
287,847
|
|
Provision for income taxes
|
|
|
|
|
|
|
9,366
|
|
|
|
115,736
|
|
|
|
(14,950
|
)
|
|
|
|
|
|
|
110,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
168,263
|
|
|
|
168,263
|
|
|
|
186,446
|
|
|
|
(24,084
|
)
|
|
|
(321,193
|
)
|
|
|
177,695
|
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of hospitals sold or held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,873
|
)
|
|
|
|
|
|
|
(6,873
|
)
|
Loss on sale of hospitals and partnership interests, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,559
|
)
|
|
|
|
|
|
|
(2,559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,432
|
)
|
|
|
|
|
|
|
(9,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
168,263
|
|
|
$
|
168,263
|
|
|
$
|
186,446
|
|
|
$
|
(33,516
|
)
|
|
$
|
(321,193
|
)
|
|
$
|
168,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year
Ended December 31, 2005
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net operating revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,829,563
|
|
|
$
|
746,554
|
|
|
$
|
|
|
|
$
|
3,576,117
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
|
|
|
|
1,095,638
|
|
|
|
325,507
|
|
|
|
|
|
|
|
1,421,145
|
|
Provision for bad debts
|
|
|
|
|
|
|
|
|
|
|
278,743
|
|
|
|
77,377
|
|
|
|
|
|
|
|
356,120
|
|
Supplies
|
|
|
|
|
|
|
|
|
|
|
341,896
|
|
|
|
87,950
|
|
|
|
|
|
|
|
429,846
|
|
Other operating expenses
|
|
|
|
|
|
|
|
|
|
|
555,381
|
|
|
|
175,643
|
|
|
|
|
|
|
|
731,024
|
|
Rent
|
|
|
|
|
|
|
|
|
|
|
58,973
|
|
|
|
23,284
|
|
|
|
|
|
|
|
82,257
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
128,062
|
|
|
|
29,200
|
|
|
|
|
|
|
|
157,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
2,458,693
|
|
|
|
718,961
|
|
|
|
|
|
|
|
3,177,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
370,870
|
|
|
|
27,593
|
|
|
|
|
|
|
|
398,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
34,930
|
|
|
|
32,988
|
|
|
|
19,267
|
|
|
|
|
|
|
|
87,185
|
|
Minority interest in earnings
|
|
|
|
|
|
|
|
|
|
|
129
|
|
|
|
2,975
|
|
|
|
|
|
|
|
3,104
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(167,544
|
)
|
|
|
(195,805
|
)
|
|
|
17,143
|
|
|
|
|
|
|
|
346,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
167,544
|
|
|
|
160,875
|
|
|
|
320,610
|
|
|
|
5,351
|
|
|
|
(346,206
|
)
|
|
|
308,174
|
|
Provision for income taxes
|
|
|
|
|
|
|
(6,669
|
)
|
|
|
124,397
|
|
|
|
2,076
|
|
|
|
|
|
|
|
119,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
167,544
|
|
|
|
167,544
|
|
|
|
196,213
|
|
|
|
3,275
|
|
|
|
(346,206
|
)
|
|
|
188,370
|
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of hospitals sold or held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,737
|
)
|
|
|
|
|
|
|
(8,737
|
)
|
Loss on sale of hospitals, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,618
|
)
|
|
|
|
|
|
|
(7,618
|
)
|
Impairment of long-lived assets of hospitals held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,471
|
)
|
|
|
|
|
|
|
(4,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,826
|
)
|
|
|
|
|
|
|
(20,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
167,544
|
|
|
$
|
167,544
|
|
|
$
|
196,213
|
|
|
$
|
(17,551
|
)
|
|
$
|
(346,206
|
)
|
|
$
|
167,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year
Ended December 31, 2007
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by(used in) operating activities
|
|
|
(85,881
|
)
|
|
|
141,137
|
|
|
|
417,930
|
|
|
|
214,552
|
|
|
|
|
|
|
|
687,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment
|
|
|
|
|
|
|
(6,864,035
|
)
|
|
|
(59,203
|
)
|
|
|
(94,810
|
)
|
|
|
|
|
|
|
(7,018,048
|
)
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(366,069
|
)
|
|
|
(156,716
|
)
|
|
|
|
|
|
|
(522,785
|
)
|
Sale of facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,996
|
|
|
|
|
|
|
|
109,996
|
|
Proceeds from sale of equipment
|
|
|
|
|
|
|
|
|
|
|
591
|
|
|
|
4,059
|
|
|
|
|
|
|
|
4,650
|
|
Investment in other assets
|
|
|
|
|
|
|
(5,502
|
)
|
|
|
(59,772
|
)
|
|
|
(7,397
|
)
|
|
|
|
|
|
|
(72,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
(6,869,537
|
)
|
|
|
(484,453
|
)
|
|
|
(144,868
|
)
|
|
|
|
|
|
|
(7,498,858
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
8,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,214
|
|
Stock buy-back
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
|
|
|
|
|
|
(182,954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(182,954
|
)
|
Excess tax benefits relating to stock-based compensation
|
|
|
1,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,216
|
|
Redemption of convertible notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from minority investors in joint ventures
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
2,223
|
|
|
|
|
|
|
|
2,351
|
|
Redemption of minority investments in joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,356
|
)
|
|
|
|
|
|
|
(1,356
|
)
|
Distribution to minority investors in joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,645
|
)
|
|
|
|
|
|
|
(6,645
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
376,319
|
|
|
|
(468,160
|
)
|
|
|
360,206
|
|
|
|
(268,365
|
)
|
|
|
|
|
|
|
|
|
Borrowings under Credit Agreement
|
|
|
|
|
|
|
9,212,000
|
|
|
|
(66,068
|
)
|
|
|
75,695
|
|
|
|
|
|
|
|
9,221,627
|
|
Repayments of long-term indebtedness
|
|
|
(299,996
|
)
|
|
|
(1,832,486
|
)
|
|
|
(142,100
|
)
|
|
|
135,557
|
|
|
|
|
|
|
|
(2,139,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
85,881
|
|
|
|
6,728,400
|
|
|
|
152,038
|
|
|
|
(62,891
|
)
|
|
|
|
|
|
|
6,903,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
85,515
|
|
|
|
6,793
|
|
|
|
|
|
|
|
92,308
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
|
|
|
|
28,560
|
|
|
|
12,006
|
|
|
|
|
|
|
|
40,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
|
|
|
$
|
114,075
|
|
|
$
|
18,799
|
|
|
$
|
|
|
|
$
|
132,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year
Ended December 31, 2006
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(151,205
|
)
|
|
|
(20,514
|
)
|
|
|
522,332
|
|
|
|
(358
|
)
|
|
|
|
|
|
|
350,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment
|
|
|
|
|
|
|
|
|
|
|
(340,314
|
)
|
|
|
(44,304
|
)
|
|
|
|
|
|
|
(384,618
|
)
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(176,070
|
)
|
|
|
(48,449
|
)
|
|
|
|
|
|
|
(224,519
|
)
|
Proceeds from sale of equipment
|
|
|
|
|
|
|
|
|
|
|
102
|
|
|
|
4,378
|
|
|
|
|
|
|
|
4,480
|
|
Disposition of hospital and other ancillary operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
|
750
|
|
Increase in other assets
|
|
|
|
|
|
|
|
|
|
|
(20,420
|
)
|
|
|
(15,930
|
)
|
|
|
|
|
|
|
(36,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
|
|
|
|
(536,702
|
)
|
|
|
(103,555
|
)
|
|
|
|
|
|
|
(640,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
14,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,573
|
|
Stock buy-back
|
|
|
(176,316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(176,316
|
)
|
Deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
(2,153
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,153
|
)
|
Excess tax benefits relating to stock-based compensation
|
|
|
6,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,819
|
|
Redemption of convertible notes
|
|
|
(128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(128
|
)
|
Proceeds from minority investors in joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,890
|
|
|
|
|
|
|
|
6,890
|
|
Redemption of minority investments in joint ventures
|
|
|
|
|
|
|
|
|
|
|
(56
|
)
|
|
|
(859
|
)
|
|
|
|
|
|
|
(915
|
)
|
Distribution to minority investors in joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,220
|
)
|
|
|
|
|
|
|
(3,220
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
306,257
|
|
|
|
(366,486
|
)
|
|
|
(34,725
|
)
|
|
|
94,954
|
|
|
|
|
|
|
|
|
|
Borrowings under Credit Agreement
|
|
|
|
|
|
|
1,031,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,031,000
|
|
Repayments of long-term indebtedness
|
|
|
|
|
|
|
(644,000
|
)
|
|
|
(3,525
|
)
|
|
|
(2,565
|
)
|
|
|
|
|
|
|
(650,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
151,205
|
|
|
|
20,514
|
|
|
|
(40,459
|
)
|
|
|
95,200
|
|
|
|
|
|
|
|
226,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
(54,829
|
)
|
|
|
(8,713
|
)
|
|
|
|
|
|
|
(63,542
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
|
|
|
|
83,389
|
|
|
|
20,719
|
|
|
|
|
|
|
|
104,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
|
|
|
$
|
28,560
|
|
|
$
|
12,006
|
|
|
$
|
|
|
|
$
|
40,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Year
Ended December 31, 2005
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by(used in) operating activities
|
|
|
(67,739
|
)
|
|
|
(38,924
|
)
|
|
|
469,028
|
|
|
|
48,684
|
|
|
|
|
|
|
|
411,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment
|
|
|
|
|
|
|
|
|
|
|
(125,493
|
)
|
|
|
(32,886
|
)
|
|
|
|
|
|
|
(158,379
|
)
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(153,422
|
)
|
|
|
(34,943
|
)
|
|
|
|
|
|
|
(188,365
|
)
|
Sale of facilities
|
|
|
|
|
|
|
|
|
|
|
(6,500
|
)
|
|
|
58,498
|
|
|
|
|
|
|
|
51,998
|
|
Proceeds from sale of equipment
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
2,213
|
|
|
|
|
|
|
|
2,325
|
|
Investment in other assets
|
|
|
|
|
|
|
|
|
|
|
(22,444
|
)
|
|
|
(12,407
|
)
|
|
|
|
|
|
|
(34,851
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
|
|
|
|
(307,747
|
)
|
|
|
(19,525
|
)
|
|
|
|
|
|
|
(327,272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
49,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,580
|
|
Stock buy-back
|
|
|
(79,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79,853
|
)
|
Deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
(1,259
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,259
|
)
|
Excess tax benefits relating to stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of convertible notes
|
|
|
(298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(298
|
)
|
Proceeds from minority investors in joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,383
|
|
|
|
|
|
|
|
1,383
|
|
Redemption of minority investments in joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,242
|
)
|
|
|
|
|
|
|
(3,242
|
)
|
Distribution to minority investors in joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,939
|
)
|
|
|
|
|
|
|
(1,939
|
)
|
Change in intercompany balances with affiliates, net
|
|
|
98,310
|
|
|
|
50,924
|
|
|
|
(135,652
|
)
|
|
|
(13,582
|
)
|
|
|
|
|
|
|
|
|
Borrowings under Credit Agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term indebtedness
|
|
|
|
|
|
|
(12,000
|
)
|
|
|
(11,863
|
)
|
|
|
(2,676
|
)
|
|
|
|
|
|
|
(26,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
67,739
|
|
|
|
38,924
|
|
|
|
(148,774
|
)
|
|
|
(20,056
|
)
|
|
|
|
|
|
|
(62,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
12,507
|
|
|
|
9,103
|
|
|
|
|
|
|
|
21,610
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
|
|
|
|
70,882
|
|
|
|
11,616
|
|
|
|
|
|
|
|
82,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
|
|
|
$
|
83,389
|
|
|
$
|
20,719
|
|
|
$
|
|
|
|
|
104,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 15(a)(1). Financial Statements
Reference is made to the index of financial statements and supplementary
data previously filed as a part of the Annual Report under Item 8 in Part II.
Item 15(a)(2). Financial Statement Schedules
The following financial statement schedule was previously filed as a part of the
Annual Report:
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted since the required information
is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is
included in the consolidated financial statements and notes thereto.
Item 15(a)(3) and 15(c):
The following exhibits are either filed with this Report or incorporated herein by reference.
|
|
|
|
|
|
|
Description
|
|
23
|
.1
|
|
Consent of Deloitte & Touche LLP*
|
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
|
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
|
59
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the
registrant has duly caused this
Form 10-K/A to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC.
(Registrant)
|
|
|
By: |
/s/ Wayne T. Smith
|
|
|
|
Wayne T. Smith |
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Chairman of the Board,
President and Chief Executive Officer
(principal executive officer) |
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By: |
/s/ W. Larry Cash
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W. Larry Cash |
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Executive Vice President, Chief Financial Officer and Director
(principal financial officer) |
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By: |
/s/ T. Mark Buford
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T. Mark Buford |
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Vice President and Corporate Controller
(principal accounting officer) |
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Date: December 22, 2008
60
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Description
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23
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.1
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Consent of Deloitte & Touche LLP*
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31
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.1
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Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
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31
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Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
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32
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.1
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Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350, adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*
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32
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.2
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Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350, adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*
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61
EX-23.1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-117697 on Form S-3 and in
Registration Statement Nos. 333-100349, 333-61614, 333-44870, 333-107810, 333-121282, 333-121283 and 333-144525 on Form S-8 of our report dated February 26, 2008 (December 19, 2008 as to the effects of the restatement discussed in Notes 1 and 17) relating to
the consolidated financial statements of Community Health Systems, Inc.
(which report expresses an unqualified opinion and includes an explanatory paragraph referring to the to the adoption of a new accounting principle in 2006),
appearing in the Annual Report on Form 10-K/A (Amendment No. 2) of Community Health Systems, Inc. for the year ended December 31, 2007.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
December 19, 2008
EX-31.1
Exhibit 31.1
I, Wayne T. Smith, certify that:
1. I have reviewed this annual report on
Form 10-K/A
of Community Health Systems, Inc.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act Rules
13a-15(f)
and
15d-15(f))
for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) designed such internal controls over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors:
a) all significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Wayne T. Smith
Chairman of the Board, President
and Chief Executive Officer
Date: December 22, 2008
EX-31.2
Exhibit 31.2
I, W. Larry Cash, certify that:
1. I have reviewed this annual report on
Form 10-K/A
of Community Health Systems, Inc.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act Rules
13a-15(f)
and
15d-15(f))
for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) designed such internal controls over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors:
a) all significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
/s/ W.
Larry Cash
W.
Larry Cash
Executive Vice President,
Chief Financial Officer and Director
Date: December 22, 2008
EX-32.1
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Community Health
Systems, Inc. (the Company) on
Form 10-K/A
for the period ending December 31, 2007, as filed with the
Securities and Exchange Commission on the date hereof (the
Report), I, Wayne T. Smith, Chairman of the
Board, President and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
Wayne T. Smith
Chairman of the Board, President and
Chief Executive Officer
December 22, 2008
EX-32.2
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Community Health
Systems, Inc. (the Company) on
Form 10-K/A
for the period ending December 31, 2007, as filed with the
Securities and Exchange Commission on the date hereof (the
Report), I, W. Larry Cash, Executive Vice
President and Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant
to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
W. Larry Cash
Executive Vice President, Chief Financial
Officer and Director
December 22, 2008